US Climate Secretary John Kerry meets MHI Minister to further the electric buses securitisation programme

The US President Joe Biden’s Special Envoy on Climate, Secretary John Kerry recently met with Dr. Mahendra Nath Pandey, the Cabinet Minister for Heavy Industries, for the continuation of talks on achieving net zero goals, especially in the context of furthering the electric bus securitisation programme.

This meeting comes on the heels of Prime Minister Narendra Modi’s three-day official visit to the United States in June, during which "President Biden and Prime Minister Modi underscored the importance of decarbonising the transportation sector, including by accelerating the deployment of zero-emission vehicles, continuing collaboration to promote public and private financing for electric transportation, and the development of biofuels, including sustainable aviation fuels," a joint statement issued by the White House had said after the meeting in June 2023.

The industry is anticipating a sovereign guarantee from the centre to indemnify bus manufacturers from payment defaults on their balance sheets of State Transport undertakings, seeking to deploy the electric buses on a long term Gross contract, per Km pay as use model.

Senior ministry officials who attended the meeting said, both parties discussed ways to develop the security mechanism that will assure bus manufacturers who were hesitant to bid on India's e-bus tenders floated by state-run CESL in January. The aim is to further support the electric bus securitisation programme.

The meeting has defined developing a timetable for rolling out the payment security mechanism through the issue of payment guarantees, which will alleviate some of the liquidity concerns of financiers, MHI officials added.  

In a report titled “The India-US Collaboration on Electric Buses Needs a Private Sector Pivot”, Promit Mookherjee, Associate Fellow at the Observer Research Foundation's Centre for Economy and Growth in Delhi, "a private sector focus for the US-India electric bus partnership could have a catalytic effect on electric bus penetration in India" if properly designed.

Mookherjee goes on to explain in the report, that a securitisation programme will ease the burden on STUs in adopting electric buses, expanding India's public bus fleet, and establishing an inclusive and affordable public transportation system.

"This would also fit well with a larger Indo-US partnership driven by private-sector linkages and a focus on greater economic integration," he has mentioned.

Convergence Energy Services (CESL), a state-owned company, recently failed to receive bids for its tender, titled "Bus Contractor for the Procurement, Supply, and Maintenance of 4,675 Electric Buses and the Development of Allied Electric and Civil Infrastructure on a Dry Lease Basis under National E-Bus Programme (NEBP)," which was released for bidding in January this year.

Even though the Government of India's FAME-II scheme provides a subsidy of Rs 20,000 per kWh of battery capacity for approximately 7,000 buses adopted by STUs under the leasing model, OEMs cited the lack of a payment assurance mechanism from STUs as the primary reason for the lack of interest.

Several State Transport Undertakings (STUs) pushed for the introduction of electric buses into the public fleet, but their poor financial health proved to be a major impediment to long-term arrangements based on the Gross Contract Model proposed by CESL in their tenders.

According to data from the Government of India Vahaan Portal, the country currently has 4,776 registered e-buses.

Also read: FAME Rationalisation: Government banking on attractive financing for last mile mobility