'EV industry needs an organisation within the government that can induce bankability of contracts’: Mahua Acharya

In its vision to go 'net-zero' carbon emissions target by 2070, the Government of India’s Convergence Energy Services has led from the front since inception in 2020. With a long-term ambition of electrifying 50,000 buses in major cities of the country, the Power Ministry arm started in earnest with a tender for over 5,000 e-buses. Mahua Acharya, who has worked with the World Bank in Washington DC understands green vehicle financing intimately and was seen as one of the key architects in putting these tenders up. Having worked in multiple countries for over decades of experience in green finance, renewable energy, and carbon markets, Mahua was able to wade through the bureaucratic challenges of looking at a win-win for Bus Manufacturers, State Transport Undertakings and the Local Municipal Corporations to get the ball rolling. She has recently resigned from the organisation. She spoke with Autocar Professional about her experience in the sector.

How would you describe your two-year tenure at CESL in terms of success, disappointments and challenges?
It has been two incredible years. This was both the best job and the hardest! It is also the hardest I've worked! But it was the most fun I've had in any place. It has also been probably the most fulfilling. So, an intense time, to say the least. I can say that the electric bus programme was perhaps the country’s biggest achievement and it has only just started. I am aware that in a country as big and complicated as India, it will take a bit of time. But I am sure that after having finished a tender for nearly 12,000 electric buses, the ball is set in motion. What makes me happy is that we managed a ground up, collaborative process with states and many others and ended up changing a lot of things – including most importantly, establishing the business model for state transport units (STU) to buy the services and not the buses themselves. We managed a unified tender that had never been done before, anywhere in the world. We had the generous collaboration of so many in the government.

How did you deal with the associated rigidity and red tape of working in government — both central and state — where ideas may not always align?
Funnily enough, that did not bother me. The Government 'EV industry needs an organisation within the government that can induce bankability of contracts’ of India’s processes are very solid and serious, and also lend a fair bit of flexibility. I didn't find the systems or the processes to be completely alien. I just didn't know them when I started. But when someone explained it to me, it did not come across as alien. Perhaps my intergovernmental background helped. There is a lot of room for merit within the Indian government which I must highlight as many people have asked me questions about pace and bureaucracy. I've really had the privilege of working with some amazing people in the government; there are some incredible officers — very committed, who work with the utmost integrity and it has been a pleasure to work with them. This is both at the state level and in Delhi. I would like to stay in touch with them.

Financing e-buses for STUs has been hard because of the common belief that these government-run organisations are likely to not pay their bills. What structural changes, according to you, are needed to make it more attractive for financiers to lap it up?
Until such time as our STUs are financially healthy and creditworthy, we will have to rely on risk mitigation instruments to cover the risk of non-payment. I think there are three or four things that are needed, if you ask about “structural changes”.

The first priority is payment security. To make this happen, a dedicated organisation is needed inside the government whose job it is to do in some ways what the Solar Energy Corporation of India or SECI does for the renewable energy sector. SECI acts as a bridge between private developers and distribution companies. In doing its job, it provides comfort to those who sell power, knowing that the power will be taken and they will be compensated. This kind of structure is needed for public transportation, although not necessarily as an exact copy. But we need an organisation like this with such a setup that can induce bankability of contracts with STUs. The financial health of STUs is known.

The government is aware, understands the problems and agrees with the need to make contracts bankable. But it takes time to build institutions or make structural reforms. To nominate an institution and have it built up takes time. So if and until we get to this state, we need to protect the current contracts because we don't want demand to get depressed, and we don’t want undue risk to pile up.

There is a lot of enthusiasm in the states and amongst the private players, who are spending thousands of crores of rupees for their contracts. The third issue is the structure of financing. Contracts need long term loans to match the 10 and 12-year durations.

These contracts now resemble infrastructure contracts where returns are moderate but steady and yield over a longer period of time. We need infrastructure money to come in, and to get there, we have to work on it. If we could blend a bit of grant money to extend the loan tenure, or to keep the interest rates fixed – or lowered, that would be very helpful for the sector. Or if we could get some grant capital to absorb a little bit of payment risk, that would also be very catalytic.

Any sort of credit enhancement would be extremely useful. The fourth piece is again a little bit long-term. The financials in this market need to deepen, and I am confident they will over time. Different investors for different stages of risk would be excellent to have — some for early stage manufacturing, others for deployment risk and some for finally holding the asset for the long term. Ideally, entities should focus on their respective strengths — OEMs on making good vehicles and focusing on technology and quality, operators to operate them and financiers to finance them.

There is also a huge potential market for e-buses in the private sector. Not much has been done on that side. Your comments on this.
Yes, there is a whole other market for private concession holders. It is very large with at least 2.5 lakh vehicles. This includes city buses, fleets of corporate houses, companies that lease out buses to schools, intercity buses, and so on. I had reached out to private operators during my tenure here. There are many of them, however several are quite small. They own between, let's say, 10 and 20, and buses even less sometimes. They do not have the balance sheets to buy electric buses. The demand is big. Electric buses are cheaper to operate. Plus, it is a nicer ride, more pleasant, and quiet. But I simply did not have the bandwidth to work on this segment and figure out how to help aggregate these companies.

Would you have created some programme if you were at the World Bank?
I thought about it more than once, as you can imagine. I do not believe that a typical lending operation would add the highest value here. We don't need the capital and even if the Bank were to come in with a traditional loan, it may be quite small compared to the needs. I think the World Bank adds a lot of value in other places — and they have been welcomed with open arms with their incredible technical resources, ability to structure things well, convene the best talent, and advice on possibilities drawing on examples from anywhere else in the world. However, we were unable to realise a formal relationship with the Bank.

This interview was first published in Autocar Professional's February 15, 2023 issue.