India’s procurement of 5,450 electric buses and subsequent increase in ambition to have 50,000 e-buses on the country’s roads by 2030 represent the immense potential for progress on climate and development goals through close collaboration between the Union and State governments. With the shared aim to rapidly electrify a key pillar of India’s public transportation, recent governance efforts have created a new business model for e-buses. If this sector is further developed, it can reduce air pollution in cities and fuel import bills, improve the balance sheets of State transport companies, and spur domestic manufacturing and job creation.
State of State-owned buses
There are currently around 1,40,000 registered public buses on India’s roads, with large numbers of them having sputtering engines that spew planet-warming fumes into the atmosphere. At least 40,000 of these buses are at the end of their lifespan and must be taken off the roads immediately.
However, most buses are owned and operated by State transport undertakings, which are in poor financial health. In part, they incur large losses because they play an important social function by providing subsidised fares to crores of Indians each day. With a few exceptions such as Mumbai’s Brihanmumbai Electric Supply & Transport Undertaking (BEST) of the Brihanmumbai Mahanagarpalika, when State transport undertakings go to the market to buy buses, they face problems of fragmented demand and high prices. Furthermore, there are limitations to nation-wide action on this issue as State governments control issues such as transit, urban governance and pollution control.
A success story
Until recently, there had never been a unified tender to address some of these challenges. Cooperative federalism can easily become a fraught issue. However, in the case of the Grand Challenge 1, a tender for 5,450 buses (across five major Indian cities — Kolkata, Delhi, Bengaluru, Hyderabad and Surat), the opposite happened. Instead of a race to the bottom, the respective expertise, strengths and needs of Union Ministries and States informed the process and the successful outcomes.
Convergence Energy Services Limited (CESL), a nodal agency of the Union government, acted as the programme manager in this effort at centralised procurement in concert, with State-led demand and customisation. Coordination between a range of Union government Ministries and State governments standardised demand conditions across these five cities and discovered prices that beat the increasingly outmoded internal combustion engines.
On a cost-per-kilometre basis, the prices discovered were 40% lower than diesel and 34% less than CNG (without factoring in the subsidy through FAME-II). A note on FAME: the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME-India) Scheme was launched under the National Mission on Electric Mobility in 2011/National Electric Mobility Mission Plan 2020, and unveiled in 2013. The scheme encourages the progressive induction of reliable, affordable and efficient electric and hybrid vehicles.
With high fuel prices and energy security challenges in the wake of the war in Ukraine, the switch to electric vehicles appears even more sensible and lucrative.
This inflection point in unit economics was enabled by three key factors: collaboration, pace and transparency. First, the tender itself was a fully consultative process and varied contributions by participants already influenced the design of future tenders. Second, there was a shared sense of urgency that shaped this collaboration, which leveraged the bureaucracy’s power when working on time-bound and measurable schemes and increased receptivity to creative and new ideas. Finally, transparency was the most resilient quality of a public process. From the outset, there was clarity about the intention to engender trust and build a publicly available process and tender that invited bids from automakers and operators.
In the wake of the first tender, it was incredibly gratifying to share a feeling of success with five States, five Transport Ministers, five State Secretaries and the heads of a range of State transport undertakings, each of whom had played a part in the process.
To be clear, excessive centralisation can have limitations and contradict the federal principles enshrined in the Constitution. For instance, India’s States and districts vary vastly in their vulnerability to climate impacts, and decentralised decision-making and locally-led adaptation will help reduce potential damage to lives and livelihoods. Urban local bodies and gram panchayats can be the heart of climate action.
However, in certain areas where India must move the needle quickly or where States lack size and financial clout, such as the electrification of mass mobility, centralised procurement and programme management can deliver architectural transformations rather than just incremental transitions.
There is much work ahead
Although a good start has been made, much work remains to be done to enable the electrification of mass mobility in India. The country’s shift to clean public transportation will require a suite of efforts, from ramping up manufacturing capacity to domestic battery production to building out charging infrastructure (ideally plugged in to a grid powered by renewables) to capacity building of State transport undertakings to developing financial instruments and structures.
Nonetheless, the progress we have made on electric bus tendering is a harbinger of climate action made possible by cooperative federalism. As India now ramps up its demand to deploy 50,000 buses across 40 cities, it will need to continue the spirit of true inter-ministerial and Union-State collaboration to fulfil its ambitious targets for green and inclusive economic development. The combined clout and strength of the federal compact can enable large strides being made towards innovative models that not only improve transit, the quality of life in cities and progress towards national climate goals but also build models for the rest of the world to emulate.
Mahua Acharya is Managing Director and Chief Executive Officer of Convergence Energy Services Limited, Government of India. The views expressed are personal