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ISSUE BRIEF
The Road Ahead for Private Electric Buses in India
Case of Non-urban Routes
12 February, 2024 | Sustainable Mobility
Krishna Khanna, Satyajit Ganguly, Faraz Ahmed, Shivanshu Singh, Kanica Gola, Sivasubramaniam Jayaraman, Sandeep Gandhi and Himani Jain

Suggested Citation: Khanna, Krishna, Satyajit Ganguly, Faraz Ahmed, Shivanshu Singh, Kanica Gola, Sivasubramaniam Jayaraman, Sandeep Gandhi and Himani Jain. 2024. The Road Ahead for Private Electric Buses in India: Case of Non-urban Routes. New Delhi: SGArchitects; Council on Energy Environment and Water; and Institute for Transportation and Development Policy, India.

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Overview

Private stage carriage bus operators across the country ferry 150 million people daily! With a majority of them operating in the non-urban sector, these operators provide critical and affordable public transport linkages across the regions. However, the rising fuel (diesel/ CNG) prices significantly threaten their current business.

This issue brief finds that non-urban e-bus operations are more profitable than diesel bus operations over the duration of the life of the bus. It highlights that the high cost of finance remains a major deterrent to e-bus adoption. Additionally, other concerns like limited e-bus designs, its robustness and longevity, lack of charging infrastructure, and poor know-how of the maintenance ecosystem are highlighted by operators.

Key Highlights

  • Under prevailing loan conditions, 95 per cent of e-bus owners will face significantly higher challenges than diesel bus owners, during the loan repayment period of 4-7 years.
  • Mofussil routes, less than 120 km across the plains (terrain), are profitable for standard 12 metre (12m) long and midi 9 metre (9m) AC e-buses.
  • Longer routes (greater than 120 km) are not profitable for operating e-buses if vehicle utilisation is less than 400 km per day. Current bus models' battery capacities are insufficient for longer route lengths.
  • Both mofussil and long hilly routes are profitable for 9m e-bus operations. E-buses on hilly routes have significantly lower cost per km (CPKs) than diesel buses, due to downhill regenerative braking.
  • For the uptake of e-buses in the private bus sector, the study recommends incentivising through interest rate subvention at 4-6 per cent for a loan term of seven years and hypothecation of e-buses. It also recommends creating leasing markets for e-buses by nudging financers, Non-banking finance companies (NBFCs) and other banking institutions.

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Krishna Khanna
Programme Associate
[email protected]
"A bigger market for buses, operated by private operators, can benefit from the transition to e-buses. For this, newer business models and financial products such as leasing models, and permit reforms are needed such that both high capital cost and charging and parking infrastructure hurdles are addressed."

Executive summary

In India, non-urban bus operations comprise 88% of all stage carriage bus services, catering to over 150 million daily passenger trips. Currently, there are 0.4 million such buses, but the demand will rise to 0.7 million buses by 2030 (MoRTH, 2019; Gandhi et al., 2021). Private operators cater tor 60% of these operations under stage carriage permits. However, we estimate that rising fossil fuel prices are pushing many operators out of business, all of whom currently ply CNG/ diesel buses.

As India looks at its 2070 net-zero targets, balancing economic growth with affordable and clean mobility is key. Here, electrification of the stage-carriage buses can present an opportunity. However, India has a negligible number of e-buses currently plying in non-urban areas, and will need 390,000 e-buses by 2030, to be on track to meet 100% electrification by 2050 (Gandhi et al., 2021). This would lead to significant reduction in emissions and catapult the decarbonisation of the sector. Our study tests the viability of e-buses in non-urban settings and documents various challenges to the transition.

We studied 22 private-operator-run intercity and mofussil routes across four states to test the viability of e-buses. We gathered e-bus-related performance and technical specifications on 16 e-bus models from three Original Equipment Manufacturers (OEMs). These OEMs have a 70% market share and this data was used to build our ‘e-bus viability tool'. We make assumptions in the model for charging tariffs; while permit fees, and parking fees are substituted as per the prevailing diesel bus operation conditions.

Key findings

E-buses are more viable than diesel buses, due to lower cost per km (CPK) across 17 of the 22 studied routes, especially for the OEM whose upfront cost is the lowest and have the highest stated fuel efficiency (FE). We find high variation in the upfront costs and operational efficacies between different OEM models. The 9 meter (9m) e-bus models show higher profitability when replacing their commensurate diesel version (same seating capacity). 12 meter (12m) e-buses offer lower profit margins than 9m e-bus owing to 20% higher bus costs and lower FE.

Battery capacity optimisation is highly sensitive to vehicle utilisation impacting the total cost of ownership (TCO) of an e-bus. However, battery capacity optimisation by route length helps save time in charging and allows operators to schedule more trips. We find the following nuances in the route length categories:

  • Mofussil routes (shorter than 120 km) across the plains (terrain) are profitable for 12m and 9m non-AC e-bus operations.
  • Longer routes (greater than 120 km) are not profitable for operating e-buses if vehicle utilisation is less than 400 km per day. We find that current bus models' battery capacities are insufficient for longer route lengths.
  • Both mofussil and long hilly routes are profitable for 9m e-bus operations. We find that for hilly routes, e-buses have significantly lower CPKs than diesel buses, due to downhill regenerative braking.

Non-urban e-bus operations are more profitable than diesel bus operations over the duration of the life of the bus. However, the high cost of finance remains a major deterrent to e-bus adoption. We estimate that under prevailing loan conditions, majority (>50%) of e-bus owners will face significantly more losses than diesel bus owners during the loan repayment period of 4-7 years.

Eight state EV policies provide up-front incentives for procurement of e-buses. Our analysis shows that either a 10- 15% subsidy on e-bus costs or an INR 10,000-12,500 per kWh on battery sizes can reduce the burden faced during loan repayment tenure, however it has no impact on the high down-payment cost. Thus, we find that leasing e-buses remain the most promising option. However, we also find that the limitations of the regulatory structure for permits, concerns around charging infrastructure, customised products and skills are barriers to exploring e-bus technology.

Recommendations

We recommend four levers to usher e-bus adoption in the non-urban sector:

  • Incentivise e-buses with lower rate of interest - Private stage carriage operations remain an important segment of the affordable public transport system. Subsidies or incentives can be limited with sunset clauses.
    • The government must arrange e-bus loans at a lower interest rate of 4-6% for a longer tenure of 7 years, to continue its support.
    • These funds can be channelled through green financing, multilateral development institutions and banks. The move will cause the least upfront burden for the exchequer, and shall help in decarbonisation of the majority of stage carriage bus sector.
  • Legalise permits for leasing models - The Union government must nudge the financing institutions to offer the e-bus on a leasing model, along with initial subsidies. The financers can lease buses, with insurance, maintenance and battery replacement(s), for a minimum of nine years. Although, they may require some risk-hedging mechanism. Under the arrangement, operators can bear the staff, permit and energy costs, thus sharing profits.
    • However, the state government(s) must legalise transferable permits to recognise lease models where different entities may provide ownership and operations.
    • Regional transport authorities (RTAs) must consider allowing different trip scheduling and an extra service operation time of 2-3 hours to compensate for time lost in opportunity charging.
  • Materialise affordable and accessible charging and parking - Generally, non-urban routes are longer and require fast charging at terminals, else round trips are unlikely. We find that charging costs for private operators must be capped at INR 11 per kWh to make e-bus operations viable (in comparison to diesel).
    • Government must fast-track the planning, siting and erection of HDVcharging stations through power distribution companies (DisComs) or a Special Purpose Vehicle (SPV) with charge point operators (CPOs).
    • Initial incentives are needed on land lease, charging equipment, or viability gap funding against the charger utilisation to attract private investment
  • Institutionalise private operators to convene, negotiate and upskill - E-bus technology is developing. Operators need more information, customised products, accessible after-sale services and skills for operating e-buses. The government must strengthen and recognise private operators' cooperatives or unions to create a platform.
    • The platform would aggregate e-bus demands, empowered to negotiate with financing institutions, regulatory agencies, CPOs and OEMs for product designs.
    • The platform would convene skilling institutions to impart the knowledge required for upskilling their crew and staff and collaborate R&D with OEMs and academic institutions.

Our findings provide e-bus financial planning for non-urban mofussil and long routes based on the ‘e-bus viability tool’. It includes product insight into required bus models and battery sizing for OEMs. Financing institutions can use these findings for developing e-bus lending portfolios and leasing contracts. These findings can support governments in establishing effective incentives, regulatory mechanisms and policy provisions to help accelerate e-bus adoption amongst private operators.

HAVE A QUERY?

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Krishna Khanna
Programme Associate
[email protected]
Key findings
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