The Indian government plans to incentivize cities to include electric buses to their public transport fleet through financial subsidies.
The Ministry of Heavy Industries and Public Enterprises has issued an Expression of Interest (EoI) document to invite proposals from states, government departments, transportation departments, and municipal bodies for procurement of electric buses across 40 cities. The subsidy will be provided under the Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India or the FAME-II scheme.
The central government will offer subsidies worth Rs 2,500 crore (US$360 million) for the deployment of 5,000 electric buses. Under the current exercise, a total of 40 cities shall be selected where a subsidy will be distributed for deployment of electric buses based on population.
Cities with a population of more than 4 million must deploy a minimum of 300 electric buses each, those with more than 1 million population must deploy at least 100 electric buses each. 50 electric buses each shall be deployed in cities under other categories. In order to be eligible for the subsidy, cities must guarantee that each bus slot will run for at least five lakhs km during its contract period and also inform about the number of buses they plan to deploy.
Eligibility for this subsidy scheme will be limited to states with a separate electric vehicles policy and other incentives to promote use of electric vehicles. State transportation units will be required to submit competitive bids to access the financial subsidy.
Among other conditions for disbursement of the subsidy is that the manufacturer of the electric buses must be an Indian company with a manufacturing facility in the country. The subsidy shall be disbursed in a phased manner with 20% issued at the time of signing the supply order for the buses, 40% at the time of delivery of the buses, and the balance 40% after six months of successful commercial operation of the buses.
The timeline set for the complete delivery of all buses has been set at just over 18 months from now.
The FAME-II scheme has been designed by the Indian government to support electrification of public and shared transportation. The total budgetary allocation for this scheme is Rs 10,000 crore (US$1.4 billion). Around 35% of this allocation has been set aside to facilitate deployment of 7,000 electric buses across various cities in the country.
A number of state transportation agencies have already announced plans to induct electric buses to their fleet. These include agencies in the cities of Mumbai and Bengaluru. The state of Kerala recently issued a tender to lease 1,500 electric buses for a period of 10 years.
The Indian government is pushing for a widespread electrification of the transportation system. It has first targeted the public and shared transportation system. We recently reported that the government may ban sale of three-wheelers using internal combustion engines by March 2023 and all two-wheelers using internal combustion engines with less than 150 cc by March 2025, and that cab aggregators like Uber and Ola Cabs may be required to have at least 40% electric vehicles in their fleet by 2026.