Withdrawal of electric bus subsidies will burden passengers with expensive tickets

In comparison to the first e-bus tender issued by the Centre-controlled Convergence Electric Services (CESL) in April last year, the lowest bid was less than Rs 44/km. Due to a lack of government subsidies, the price has risen 36% to Rs 60/km in the most recent tender.

According to Electric bus manufacturers, the Centre's decision not to renew subsidies on electric buses will be included in the cost structure in future bids of participants before they inevitably pinch the pockets of the ordinary traveller.

The lowest bid was less than Rs 44/km in the first e-bus tender launched by the Centre-controlled Convergence Electric Services (CESL) in April last year. Due to a lack of government subsidies, the price has risen 36% to Rs 60/km in the most recent tender.

"Even if the FAME subsidies are not there, it will lead to some increase in charge per kilometre, and that will be part of the bids that all the OEMs will give. This will then be reflected in the ticket prices," said Girish Wagh, executive director of Tata Motors.

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In the first CESL tender, the government approved 5,595 electric buses. Tata Motors' bids shocked other bidders, notably PMI Electro and Olectra Greentech before it won the contest.

"We did not participate in CESL's second tender because we had requested a payment security mechanism from the government, which was not implemented. CESL issued a third tender in which only one bidder participated. The payment security mechanism was also missing, thus the tender will be re-bid," Wagh added.

The initial tender discovered pricing for a 12-meter bus of 43.49/km and a 9-meter bus of 39.21/km. These, according to CESL, were on par with or very close to the operating costs of diesel buses.

" With the subsidies gone, the price is expected to rise. With the FAME subsidy, the average cost, let us say, is Rs 50/km. Even if the price rises to Rs 100/km, the gap will remain enormous. The cost of running a diesel bus for a state transport undertaking (STU) is Rs 150/km, according to Olectra," said Sharat Chandra, CFO of Olectra Greentech.

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CESL's most recent tender had a disappointing reaction, with all but one company passing it up. The reason for this was that the government was unable to answer OEM concerns about the lack of a payment security system.

A payment security mechanism is essentially a security fund that offers interest-free capital in the event of a payment default. In the case of electric buses, the STUs bear the burden of making timely payments to the service provider.

However, the majority of STUs are in financial distress. As a result, electric bus manufacturers have asked the government to establish a security fund.

"The third tender, in which no one participated, is based on dry leasing. The current concept is a wet lease, thus dry lease means the STU drivers will be involved, which none of the OEMs are interested in. We will not have control over them," Chandra continued.