In a visionary move, India sets its sights on subduing a million diesel-operated buses with electric equivalents within the next ten years, leveraging incentivizing measures and regulatory reforms to spearhead a sustainable transport revolution.
PMO to Decide on Ambitious Electric Bus Replacement Plan
The Prime Minister’s Office (PMO) is poised to make a crucial decision on a groundbreaking proposal to replace a million diesel-fueled buses with electric alternatives on Indian roads over the next ten years. According to insiders familiar with the matter, the plan will involve a combination of subsidies and regulatory measures to incentivize this monumental transition.
Empowering Local Electric Bus Manufacturing
In addition to spearheading the transition to electric buses, the 10-year initiative is expected to include measures aimed at stimulating local production of electric buses, reducing the goods and services tax (GST) rate on components, and bolstering the development of charging infrastructure. This comprehensive approach could potentially catalyze a broader shift towards electric vehicles (EVs) and substantially decrease India’s reliance on oil imports while also making significant strides in curbing vehicular emissions.
Expanded Scope and Collaborative Effort
This ambitious project builds upon an earlier proposal from the heavy industries ministry to replace 800,000 combustion-engine buses with electric alternatives. Following input from various ministries, the scope of the project has been widened, reflecting a collaborative effort to bring about a transformative change in the transportation sector. The heavy industries ministry, along with the ministries of commerce and industry, and housing and urban poverty alleviation, is in the process of formulating a formal proposal to be presented to the PMO.
Expanded Scope and Collaborative Effort
For context, India currently hosts approximately 2.3 million diesel and CNG-run buses, with only around 6,500 electric buses in operation based on vehicle registration data. Notably, the majority of electric buses were sold between 2019 and 2023. In comparison, 152,173 diesel and 15,163 CNG buses were sold in the same period. The government anticipates that the first two years of the ten-year plan will be dedicated to developing domestic manufacturing capacity for electric buses.
A Bold Plan for India’s Public Transport: Transitioning to Electric Buses
The Office of the Prime Minister (PMO) is contemplating a transformative proposal to replace a million diesel buses with electric ones in India within the next ten years. This ambitious plan encompasses a variety of strategies, including subsidies and regulatory interventions. Additionally, the proposal seeks to bolster local e-bus manufacturing while also advocating for a reduction in the GST rate on components.
Attracting Foreign Companies for Local Manufacturing
The proposal also includes provisions to allow foreign companies to establish manufacturing facilities in India. This strategic move aims to hasten the development of a robust local manufacturing ecosystem. Moreover, the plan suggests the implementation of interest rate subvention for companies that invest in creating manufacturing capacity within the country.
Operating Expense Model and Lease Agreements
Under this proposal, an operating expense (opex) model is likely to be adopted. Intermediary entities would procure the buses from manufacturers and then lease them to state units based on a per-kilometer arrangement. This arrangement is designed to alleviate the financial burden on state coffers, considering that each electric bus costs approximately ₹1.5 crore after factoring in subsidies.
Learning from FAME-India Programme
Drawing inspiration from the electric bus segment of the Faster Adoption and Manufacture of Electric and hybrid Vehicles in India (FAME-India) program, the proposed scheme reflects a similar opex model. In the existing FAME-India program, intermediary companies purchase electric buses and lease them to states at rates ranging from ₹50-100 per kilometer, with a minimum usage guarantee.
Impact on Economy and Job Creation
Aanchal Jain, chief executive officer of PMI Electro Mobility, a key player in the electric bus manufacturing sector, emphasized the positive impact of such initiatives. According to Jain, the higher adoption of electric buses is poised to drive the local economy, foster the growth of the bus manufacturing ecosystem, and attract larger investments in capacities. Additionally, this move is expected to lead to increased indigenization of bus components, ultimately resulting in the creation of new jobs.
Proposal for Lowering GST Rate on Electric Bus Components
The proposal presented to the Prime Minister’s Office (PMO) seeks to recommend a reduction in the GST rate for electric bus components, particularly battery cells, from the current 18% to 5%. This initiative aims to address the existing inverted duty structure within the electric vehicle (EV) industry, where crucial inputs such as battery cells and other components are subjected to GST rates ranging from 18-28%, while the GST charged on the sale of buses is only 5%. Consequently, this results in manufacturers accruing unutilized input tax credit.
Infrastructure Development for Charging Stations
In addition to the GST rate revision, the proposal also emphasizes the necessity of creating an adequate infrastructure for charging stations for electric buses. It seeks to involve NTPC Ltd and Power Grid Corp. of India Ltd in the development of this charging network, thus laying the foundation for a robust ecosystem to support the widespread adoption of electric buses.
Environmental and Economic Impacts
The overarching objectives of this proposal include a reduction in emissions and India’s oil import expenditure, alongside the promotion of a flourishing domestic EV manufacturing landscape. If greenlit, this initiative will mark the government’s fourth concerted effort toward fostering growth in the EV segment within the automotive sector. Notably, existing schemes such as FAME-India and two production-linked incentives (PLI) schemes for advanced automotive technologies and advanced chemistry cells underscore the government’s commitment to driving progress in this domain.
Focus on Public Transportation
Drawing from the insights garnered through previous schemes, there is a growing consensus within the government regarding the most efficacious approach for steering the Indian automotive industry toward electrification. It is becoming increasingly apparent that prioritizing public transportation is pivotal in propagating the benefits of cutting-edge transportation technologies to a broader spectrum of the population, as opposed to solely catering to a select group of affluent individuals inclined toward personal vehicle ownership. This strategic shift aligns with the government’s broader vision of democratizing the advantages of modern transportation systems, thereby catalyzing a comprehensive transformation in the mobility landscape.
Conclusion
The proposed transition to electric buses represents a significant step towards fostering sustainable and environmentally friendly transportation in India. With potential wide-reaching implications, the decision made by the PMO on this matter is poised to shape the future of India’s public transportation landscape.
If implemented, this bold plan has the potential to revolutionize India’s public transportation sector, resulting in significant environmental benefits and economic implications.
The proposal not only advocates for a revision in the GST framework for electric bus components but also underlines the imperative need for concerted efforts in infrastructure development and the recalibration of focus toward public transportation as a linchpin in the nation’s EV adoption journey. If endorsed, these initiatives are poised to instigate a paradigm shift in India’s automotive industry, steering it toward a sustainable and electric-centric future.
