Under the FAME-II scheme, 7m, 9m and 12m electric buses are eligible for a capital subsidy of INR 35 lakh, INR 45 lakh and INR 55 lakh respectively, subject to meeting technical specifications and localization requirements
As India rapidly hops onto the electric mobility bandwagon, a new report by rating agency ICRA suggests that electric buses (e-buses) are expected to drive India’s electrification dream, with the segment expected to witness healthy traction going forward.
As per the report, e-buses are expected to account for 8-10 per cent of new bus sales by the fiscal of 2025.
The traction in the e-bus segment is already visible over recent months, despite the overall stress in the public transportation segment over the past year and a half due to the pandemic.
Globally, the e-bus market is dominated by China, which accounts for 98 per cent of the global e-bus fleet, and 95 per cent of the global stock of dedicated bus chargers.
In India, significant incentives and subsidies have been announced through various schemes like FAME, Smart Cities etc to reduce the cost of acquisition, and spur e-bus adoption.
“While limited charging infrastructure, range anxiety and high capital costs have been the key deterrents in electrification across segments, these are relatively low for the bus segment,” Rohan Kanwar Gupta, Vice President & Sector Head, ICRA Ratings.
Under the FAME-II scheme, 7m, 9m and 12m electric buses are eligible for a capital subsidy of INR 35 lakh, INR 45 lakh and INR 55 lakh respectively, subject to meeting technical specifications and localization requirements.
According to Srikumar Krishnamurthy, Vice President & Co-Group Head, ICRA Ratings, bus costs are the single largest cost element in electric bus projects, accounting for 75-80 percent of project costs.
“With the capital subsidy of INR 35 lakh –INR 55 lakh per bus under the FAME II scheme, the capital subsidy element can fund a large part of the project costs, up to even 40 percent, which augurs well for the viability of these projects. Additionally, coupled with the significant savings on fuel costs (3-5x cheaper vis-à-vis conventional buses), these subsidies help to bring the total cost of ownership of e-buses on par with the CNG buses, and more importantly 20-30 percent lower than diesel buses,” he added.
The Gross-Cost Contract (GCC) model, or opex model of operations, has emerged as the preferred route for e-bus adoption in India, especially as the FAME II scheme offers capital subsidy only for buses procured under this route, added the report.
This model helps to significantly alleviate the upfront capital burden on cash-strapped SRTUs, while spurring electrification by increasing private participation in the segment.
As per ICRA, while execution-related risks remain relatively low for these projects, operational risks are somewhat higher, given the lack of adequate track record of electric vehicles in the country.
Rohan Kanwar Gupta, Vice President & Sector Head, ICRA Ratings, said, “Although the Niti Aayog has outlined a Model Concession Agreement for the electric bus projects under the GCC model, keeping in mind the interests of various stakeholders, it still remains to be seen how various risks related to project execution, bus performance, receivables etc. play out over the medium to long term. Nevertheless, as the model matures, electric buses are expected to witness increased adoption going forward, aided by the favorable cost economics.”
“Among the various automotive segments, buses would be among the first ones witnessing faster electrification, especially for intra-city operations. While limited charging infrastructure, range anxiety and high capital costs have been the key deterrents in electrification across segments, these are relatively low for the bus segment,” he added.
