How Can Microbuses Serve the Next 4000 Indian Cities?

REPORT

Microbuses have Mega Demand in Indian Cities

Rethinking Public Transport for all 4,200 Cities

23 October, 2026 | Sustainable Mobility

Himani Jain, Saoni Sanyal, and Krishna Khanna

Suggested Citation: Jain, Himani, Saoni Sanyal, and Krishna Khanna. Microbuses have Mega Demand in Indian Cities: Rethinking Public Transport for All 4,200 Cities. New Delhi: Council on Energy, Environment and Water (CEEW), 2026.

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Overview

Fewer than 100 of India’s roughly 7,900 urban centres have a formal bus-based city transport undertaking (ASRTU 2023). Most small and medium-sized cities rely on informal intermediate public transport (IPT) such as e-rickshaws, shared autos and tempos (Kumar et al. 2026), which are often ageing, overloaded and polluting. IPT vehicles seat only 2–8 passengers, while standard buses seat 23–45 and need wider roads than many of these cities have. This leaves a market gap for microbuses: 10- to 22-seat vehicles weighing less than 5,000 kg, classified as M2-category vehicles under the Central Motor Vehicles Rules (CMVR), 1989. The PM-eBus Sewa scheme covers 169 cities (PIB 2023), leaving nearly 3,900 cities with populations below 3 lakh outside its scope by 2031.

Across the Global South, microbuses already carry a large share of urban trips: jeepneys in Manila, public light buses in Hong Kong, combi taxis in South Africa and peseros in Mexico City. In some cities, they account for 60–70 per cent of road-based motorised urban trips (Dumedah and Eshun 2020). This policy brief tests the hypothesis that microbuses can optimally serve the transit needs of India’s statutory cities. It uses a public-transit vehicle-capacity optimisation tool (PT V-Co tool), using Census 2011 data (OGD Platform India 2011) and CEEW mobility surveys (Soman, Kaur and Ganesan 2019). It estimates the optimal vehicle size and fleet at the route level, projects demand to 2031, and showcases 2–3 representative cities in each of five city-size categories, from small towns to megacities. It also draws on roundtables with government officials from 12 states, Original equipment manufacturers (OEMs), IPT operators, banks, non-banking financial companies (NBFCs) and development finance institutions to recommend how microbuses can be introduced at scale.

Figure 1. India will require an estimated 6.5 lakh stage-carriage microbuses for urban operations by 2031

Key findings

The assessment finds that microbuses in India are not held back by demand but by the absence of suitable vehicles, permits, and business models. India needs approximately 6.5 lakh stage-carriage microbuses by 2031 across about 4,200 cities, with 77 per cent of this demand concentrated in small and medium-sized cities. The key findings are summarised below:

Microbuses are the optimal vehicle for short- to medium-length trips of up to 10 km. They suit intra-city travel in small, medium-sized and large cities better than standard buses. They are optimal for first- and last-mile feeders to metro and bus rapid transit systems in million-plus cities and megacities. Microbus fleets scale with city size: about 70–100 microbuses in a typical small city, 150–200 in a medium-sized city, 380–500 in a large city, 850–970 in a million-plus city, and 4,000–5,200 in a megacity.
Microbuses best match passenger demand of 140–270 passengers per hour per direction, at a frequency of one vehicle every four-six minutes. Because they serve routes of up to 10 km, electric variants with smaller battery capacities may be viable. Microbuses can also provide regional mofussil (peri-urban) connectivity, and offer distinct advantages in hilly areas: safe operation on narrow roads, viability on routes with low and dispersed demand, and better power and torque on hilly terrain.
Electric microbuses could deliver large climate and air-quality gains. Replacing three-fourths of India’s approximately 70 lakh ageing autorickshaws and more than 15 lakh internal combustion engine (ICE) minibuses on low-occupancy routes could abate approximately 3–3.5 crore tonnes of CO₂ by 2031 and reduce tailpipe PM2.5 emissions by about 2,800 tonnes a year. These gains come from fewer vehicle kilometres, cleaner BS6 or electric technology, and a shift away from private vehicles. The estimates reflect an ambitious scenario in which public transport carries 80 per cent of motorised trips.
The Indian market lacks microbus-type vehicles for public transport, and regulation is a key reason. Annual maxi cab sales are around 25,000 units, still below the pre-COVID level of 30,000–32,000, and minibus registrations average only 5,000–6,000 a year (MoRTH 2026). Permit rules split these vehicles into maxi cabs (capped at 12 seats and largely restricted to tourist use), and buses (for vehicles above 13 seats -permits cost much more). As a result, smaller cities either buy larger buses that add to operating losses or leave unmet demand to informal IPT, which further drives private-vehicle use, congestion and pollution.
Scale needs a national programme, not city-by-city procurement. The brief recommends a National Microbus Programme that aggregates demand, beginning with the procurement of 8,000–10,000 microbuses for pilots in 30–50 small cities. The pilots should run a “business-model sandbox”, testing gross-cost, net-cost and hybrid PPP contracts, since the binding constraint on scale is a bankable business model, rather than the vehicle. The programme should be backed by a clear definition of microbuses under the CMVR, city-cluster planning led by state urban development departments, and state-backed finance such as credit guarantees, interest subvention and scrappage-linked incentives to help informal IPT operators shift to modern clean microbuses.

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Himani Jain

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“Public Transport cannot remain restricted to mega-cities and million-plus cities. Standard buses are not viable for narrow roads, medium-dispersed travel demands and for small and medium cities. Rethinking public transport for these cities requires smaller vehicles, operated at 4-10 minutes frequency on roads that are 7- 20 meters right of way. Microbuses are needed in large numbers to quickly transform formal public transport supply - with cleaner, modern vehicles. Microbuses provide opportunities for attractive business models, engaging private operators and limited infrastructure expenditures burden on city budgets.”

Executive summary

Fewer than 100 of India’s 7,900 urban centres1 have a formal bus-based city transport undertaking (ASRTU 2023). Most of the small and medium-sized cities2 today are served only by informal intermediate public transport (IPT) (Kumar et al. 2026). IPT largely comprises informal shared transport services such as e-rickshaws, shared autos, tempos, and other such passenger vehicles. Most of these vehicles are ageing, contribute to congestion and disproportionate pollution. IPT vehicles are often suboptimal, with seating capacities of only 2–9 passengers, in dense urban settings. At the other end of the spectrum, standard buses typically seat 23–45 passengers. This creates a potential market gap for microbus-type vehicles 10- to 22-seater vehicles weighing less than 5,000 kg. These are typically classified as M2 category vehicles under the Central Motor Vehicles Rules (CMVR), 1989. These microbuses are potentially more adaptable to the spatial and operational constraints of narrow roads, dense city-core areas, and dispersed areas with lower travel demand.

Japan and South Korea have similar microbuses that operate as government-run services or demand-responsive stage-carriage services, connecting villages, elderly passengers, and tourists with large cities. Microbuses are widely used as flexible and affordable paratransit services, operated by informal private operators in cities across the Global South. In Latin America, 16-seater peseros and combi taxis operate as informal microbus services, while South Africa has dala-dala buses that typically accommodate up to 20 passengers. Hong Kong, Manila, and Jakarta have semi-formal microbus services with defined routes and fares, using jeepneys (old military jeeps use a public transport) and public light buses (PLBs) that seat 14–18 passengers. These microbuses sometimes account for as high as 60–70 per cent of the total modal share of road-based motorised transport in the city (Dumedah and Eshun 2020).

Learning from the Global South experience, our study aims to test the hypothesis that ‘microbuses can optimally serve the transit needs of top 4,000 small and mediumcities in India’. The policy brief informs city and state governments in planning their future public transit fleets. Our model supports rethinking urban bus transit for small and medium-sized cities, especially for narrow roads and routes with low, dispersed passenger demand.

Study develops a ‘public-transit vehicle-capacity optimisation tool’ (PT V-Co tool) to estimate the use case and market size for microbuses across Indian cities. The tool assesses various modal shift scenarios and planned city transport service levels. The model develops inputs for trip-length distribution, number of routes, and routelevel trip demand based on a 2020 CEEW survey of 61 cities (Soman, Kaur and Ganesan 2019) and Census 2011 travel data (OGD Platform India 2011). We also model 2–3 representative cities in each of the five city population categories – small (20,000 – 50,000) medium (50,000 – 3 lakh), large (3–10 lakh), million plus cities (10–40 lakh), and megacity (more than 40 lakh) – to corroborate the model inputs. Thus, the model computes the optimal vehicle capacity (in seats) at the route level, for varied trip lengths covering intra-city and peri-urban areas.

The required number of microbuses and their use cases are calculated using the V-Co tool for each of the five citysize categories. Microbus demand is projected for 2031 based on anticipated urbanisation and the growth in the number of cities.

Key findings

India needs approximately 6.5 lakh microbuses by 2031 to serve top 4,000 cities, with about 3/4^th demand concentrated in small and medium-sized cities. Our model and tool-based analysis highlighted the following key insights:

Microbuses are optimal for short to medium length trip like up to 10 km. They may be more suitable than standard buses for intra-city travel in medium-sized and large cities. Microbuses also remain optimal first- and last-mile vehicles for metro feeder services in metropolitan and megacity areas.
Microbuses are optimal for passenger demand of 140–270 passengers per hour and at a frequency of one vehicle every four minutes. Smaller battery capacities may be viable, as microbuses serve mid-range routes of up to 10 km. Microbuses could also provide regional mofussil (peri urban area) connectivity.
Microbuses offer distinct advantages in hilly areas, including safe operation on narrow roads, viability on routes with low, dispersed demand, and better power and torque on hilly terrain.
There is lack of microbus type of vehicle options in the Indian market to meet this demand, unlike in comparable Global South economies. Smaller sized cities are forced to opt for larger buses, potentially burdening them with additional operational losses. As a result, transit networks remain sparse and service frequencies low, while informal IPT absorbs unmet demand, driving private-vehicle use, congestion, and pollution.
Microbuses could help mitigate approximately 2,800 tonnes of particulate matter (PM) pollution annually. The report presents only the ambitious modal shift scenario -80 per cent of public transport motorised trips shift to microbuses, to maximise environmental and decongestion gains. We estimate gains by optimising vehicle kilometres, reducing private-vehicle use, and introducing cleaner technologies such as electric vehicles (EVs).

Figure ES1. India will require an estimated 6.5 lakh stage-carriage microbuses for urban operations by 2031

Recommendations

To introduce microbuses at scale, we recommend a three-step process based on our study and extensive stakeholder discussions:

Develop a small bus programme for public transit in small and medium-sized cities. A few original equipment manufacturers (OEMs) have developed electric microbus prototypes, presenting an opportunity for governments to aggregate demand and procure 8,000–10,000 microbuses for pilot deployment in 30–50 small cities. Through this approach, they can inform vehicle design, standardisation, and specifications and potentially open up the private market for these vehicles. A programmatic approach would also help address barriers in these nascent markets, including limited technical planning and implementation capacity at the local level, as well as the capital expenditure required to set up depots, terminals, bus stops, charging infrastructure, and rolling stock. Additionally, aggregated public procurements will give OEMs greater confidence to introduce more products in the microbus category.

Ease and rationalise regulations governing microbuses. Current permit regulations classify microbus-like vehicles as ‘maxi cabs’ or ‘minibuses’, limiting their use in public transport. Maxi cab permits limits seating capacity and restrict operations to tourism, while bus permits are comparatively costly. Defining microbuses under the Central Motor Vehicles Rules is therefore essential to enable their use as route-based, stage-carriage public transport. Pilot interventions, primarily driven by OEMs and research institutions, are critical to develop electric variants and fleet management practices. State governments must consider planning microbus initiatives to encourage sector formalisation.

Establish a robust institutional set-up to channel investment and finance for the scaled adoption of microbuses. Microbus adoption can be further scaled through two methods:

State-led institutions, such as state infrastructure development corporations, should leverage green financing to develop microbus-based transitprograms. These, coupled with state-wide demand aggregation, clean energy mandates, and restrictive policies on private-vehicle use, can enhance the feasibility of such endeavours.
The state may opt to formalize the current informal IPT markets by providing credit guarantees, interest subvention, and scrappage-linked incentives to replace the old and polluting IPT vehicles with standardised, modern microbus models.

As India urbanises at a faster rate, grows economically, and decarbonises while addressing the challenge of air pollution, rethinking microbuses can provide reliable, clean public transport across its top 4,000 cities. Thus, the union government must conceptualise a National Small Bus Programme to aggregate demand across cities and catalyse the market. A national programme can help build local public assets, transit infrastructure, and technical capacity at scale, thereby improving citizens’ quality of life. To do this, civil society organisations (CSOs), OEMs, and academics must collaborate to map travel patterns in small and medium-sized cities across urban India, develop suitable transit solutions through pilots, and conduct market and business assessments to inform robust vehicle specifications. Our study is the first step in this direction.

FAQs

Why do India’s small and medium-sized cities need a different kind of bus?

About 40 per cent of India’s urban population lives in small (20,000–50,000) and medium-sized (50,000–3 lakh) cities (OGD Platform India 2011), yet most have no formal city bus service. Their road networks are narrow and organically developed; a typical small city has only 2–3 arterial roads wide enough (over 18 m right-of-way) for standard buses, and passenger demand is too low and dispersed to fill them. Informal IPT fills the gap, but it is often overcrowded and inaccessible to elderly passengers, children and persons with disabilities (Nichols et al. 2025). Travel is also getting costlier: in urban areas, the share of household expenses spent on transport rose from 6.52 per cent in 2011–12 to 8.59 per cent in 2022–23 (MoSPI 2024).
What is a microbus, and how is it different from IPT and minibuses?

The study defines microbuses as M2-category vehicles with 10–22 passenger seats and a gross vehicle weight of up to 5,000 kg. IPT vehicles such as e-rickshaws and shared autos typically seat 2–8 passengers, while minibuses seat 18–27 including the driver, so the microbus range partly overlaps with minibuses. In India, these vehicles currently fall under two separate permit categories - maxi cabs and omnibuses- each with its own conditions on seating, use and specifications (MoRTH 1988). Neither is designed for route-based, stage-carriage public transport operations.
How did the study estimate demand for 6.5 lakh microbuses?

The PT V-Co tool estimates the optimal vehicle capacity for each route from route length, the road network available for public transport, number of routes, trip rates, trip-length distribution, target modal shift and planned service frequency. Inputs draw on Census 2011 data, CEEW mobility surveys, an IIT Delhi framework for selecting urban transport systems (Tiwari and Jain 2023) and UN projections of city numbers (UN DESA 2025). The headline estimate assumes public transport carries 80 per cent of motorised trips, in line with the desired high public transport modal share sought by the National Urban Transport Policy (MoUD 2006) and state/city policies.
Where would microbuses be needed most?

Small cities account for about 2.62 lakh microbuses (41 per cent of total demand) and medium-sized cities for about 2.31 lakh (36 per cent). Large to mega cities would need about 40,000-70,000 microbuses. What changes with city size is the role of the vehicle, not the vehicle itself: in smaller cities microbuses would form the core public transport network, while in larger cities they would mainly serve short trips, especially in old city cores, urban villages and low-income areas with narrow roads and as metro feeder service. This estimate complements, rather than replaces, the requirement for standard buses on wider, high-demand corridors.
Are there working examples of microbus services in India?

Yes, though mostly informal or small in scale. In Delhi, around 6,000 Gramin Sewa vehicles run as metro feeders and shared transport on more than 100 regulated routes, at fares of INR 5–15. Alwar, Rajasthan, formalised Tata Magic vehicles as public transport under the Alwar Vahini initiative by scrapping 720 old vehicles, launching a fleet of 58 vehicles and upgrading bus stops, lighting and CCTV. There are existing informal microbus services, for example using tempo in UP, Gujarat, magic-taxi in Madhya Pradesh cities, kadukas and bhoond in Punjab towns.