The Indian government has approved a $7 billion scheme to deploy 10,000 electric buses in 169 cities over a decade, along with charging and associated infrastructure facilities. The federal government will allocate $2.4 billion as part of the cost of the scheme, based on a public-private partnership model, Information Minister Anurag Thakur said at a briefing, according to a Reuters report. The source of the remainder of the funding, whether it will come from state governments or private entities, remains uncertain. The government’s push for electric public transportation vehicles comes as it works to cut emissions and reduce fuel imports, with companies offered incentives to build vehicles and parts in the country. The Indian cabinet also approved seven railway tracking projects worth $3.9 billion to boost connectivity and mobility across nine states.

The Reuters report adds that pursuing plans for an eventual fleet of 50,000 electric buses nationwide, at an estimated cost of $12 billion, the Indian government has been aggregating demand from state governments and issuing contracts or tenders inviting companies to bid. New Delhi’s monetary support to green the country’s public transport comes at a time when bus makers have raised concerns about state transport corporations that have previously delayed payment for conventional buses. Having a dedicated fund will provide security to bus makers, allowing them to bid freely for government contracts, analysts told Reuters.

Following the announcement, as per a TradeFinanceGlobal analysis, stocks of companies anticipated to gain from the scheme saw an uptick. Olectra Greentech and JBM Auto, renowned electric bus manufacturers, witnessed an 8.8% and 10.1% surge in their shares respectively. Tata Motors reported a 1.9% increase, while shares of Ashok Leyland, which owns an electric bus manufacturing subsidiary, ascended by 0.9%.

An Energyworld report points out that India has ambitious goals for electrifying public transportation. The country has a vision of increasing the share of electric vehicle (EV) sales to 30% in in private cars, 70% in commercial vehicles, 40% in buses, and 80% in two-wheelers and three-wheelers by 2030. In absolute numbers, this could translate to 80 million EVs on Indian roads by 2030. Although it is also exploring solutions like green hydrogen and biofuels, the Indian government recognises that electrification is a prerequisite for decarbonising transportation.

The report said that electrification of public transport has multiple benefits, such as reducing air and noise pollution, lowering running costs, and establishing the supply chain that will ultimately drive economies of scale for other categories of vehicles. Addressing these emerging challenges in a timely fashion will help turn its electric mobility vision into a reality. The National Electric Bus Program, run by Convergence Energy Services Limited (CESL), a central public sector company, is leading the government’s efforts for the electrification of buses. The company aims to deploy 50,000 electric buses across the country in the next few years. This requires a combination of solutions. For the short term, a payment security scheme wherein the central government creates a separate fund to cover the delays in payments by states to bus leasing companies will develop confidence in the business model.

An earlier Reuters report had pointed out that Indian banks are reluctant to lend to electric-bus makers for supply to ailing state transport operators over concerns on recovery of dues, hurting the country’s goal of curbing vehicle emissions, according to banking, industry and government sources. The lack of funding is limiting the ability of e-bus makers to participate in federal government tenders to supply to states, threatening to slow the electrification of major public transport now reliant on diesel. Each electric bus costs $151,138, about five times that of a diesel one. Financing diesel buses is safer because in the case of any default, banks can repossess the asset and easily redeploy it. E-buses, however, need charging and other infrastructure that may not be available everywhere, according to Reuter sources.

Reuters reports that the road transport sector accounts for 13% of carbon emissions in India. Buses are one of the most significant modes of public transport in India and state transport undertakings own and operate 150,000 buses that carry 70 million passengers daily. As India plans to electrify its public transport, the poor financial health of most state transport undertakings presents a challenge. Poor charging infrastructure and costly electric vehicles add to this challenge. Nonetheless, India has set ambitious targets of making 30% and 70% penetration in private and commercial mobility respectively by 2030, an Economic Times (ET) report said.