By 2025, electric buses are expected to make up 8-10 per cent of all bus sales, supported by FAME II subsidies until 2024 and later by favourable operating and capital costs, according to credit rating agency ICRA.

The traction in the e-bus segment is already visible in recent months, despite the overall stress in the public transportation segment over 18 months due to the pandemic. Although on-ground deployment under the FAME scheme has been somewhat delayed, the scheme’s extension until April 2024 would support adoption over the medium term.

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The FAME II scheme entails an outlay of ₹3,500 crore towards supporting e-bus adoption in India — electric buses of 7m, 9m and 12m length are eligible for a capital subsidy of ₹35 lakh, ₹45 lakh and ₹55 lakh, respectively, subject to technical specifications and localisation.

Bus costs account for 75-80 per cent of electric bus project costs, said Srikumar Krishnamurthy, Vice President and Co-Group Head, ICRA Ratings. “The capital subsidy of ₹35-55 lakh per bus under the FAME II scheme can fund up to 40 per cent of the project costs, which augurs well for their viability. Coupled with the savings on fuel costs (3-5x cheaper vis-à-vis conventional buses), these subsidies will help bring the total cost of ownership of e-buses on par with CNG buses, and, more importantly, 20-30 per cent lower than diesel buses,” he said.

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While China leads in e-bus adoption globally, other regions are gradually picking up. Government support has played a big role in electrifying China’s bus fleet. The key enabling factors include charging infrastructure support, alternative financing models and subsidies, while OEMs offered lifetime warranties for the vehicles and components to offset the technological risks and training for operator staff.

India, too, has offered incentives and subsidies through schemes like FAME and Smart Cities to reduce the cost of acquisition; many State-level EV policies have announced electrification targets and timelines for buses, helping create a roadmap.

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 favours this route. This model helps alleviate the upfront capital burden on cash-strapped state transport undertakings, while spurring private participation too. However, the model is evolving, and operators are looking at ways to mitigate the risks in it.

While the FAME II scheme and associated subsidies would support e-bus penetration in the initial years, expectations are that capital costs would reduce with localisation and evolution in battery technology, which, coupled with favourable operating economics, would support sales subsequently.

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