The government has earmarked Rs 4,000 crore towards the PM E-Drive or the Pradhan Mantri Electric Drive Revolution in Innovative Vehicle Enhancement, scheme and Rs 1,310 crore for the PM-eBus Sewa-Payment Security Mechanism for the financial year 2024, according to the budget documents.
The Rs 10,900-crore PM E-Drive scheme, which superseded FAME scheme, was launched on October 1, 2024, to provide subsidies on the purchase of electric two-wheelers, electric three-wheelers, electric trucks and buses as well as electric ambulances.
The PM E-Drive is seen as crucial scheme in increasing the adoption of electric vehicles in the country by reducing the upfront cost to consumers thoroug subsidies. The budget documents show that the allocation for the PM E-Drive scheme in the financial year 2025 was Rs 1,871 crore.
The two-year scheme expires on March 31, 2026. It has a total outlay of Rs 3,679 crore for electric two and three-wheelers, Rs 4,391 crore for e-bus, Rs 500 each for electric trucks and ambulances, and Rs 2,000 crore for charging infrastructure.
Electric two-wheelers currently get a subsidy of Rs 5,000 per kWh subject to a cap of Rs 10,000 per vehicle, but will be cut to Rs 2,500 per kWh with a cap of Rs 5,000 per vehicle from April 2025.
After achieving the number of three-wheelers target number for providing incentives in the financial year 2025 during in November, the government advanced the target for the financial year 2026 with reduced incentives of Rs 2,500 per kWh with a cap of Rs 25,000 per cargo electric three-wheeler.
Electric buses with a maximum ex-factory price of Rs 2 crore gets a subsidy of Rs 10,000 per kWh under the scheme. The maximum limit for subsidy for electric buses with 10-12 meters has been set at Rs 35 lakh, while buses with 8-10 meters and 6-8 meters have a cap of Rs 25 lakh and Rs 20 lakh, respectively.
The government is yet to come out with a final notification of the quantum of per vehicle subsidy and criteria for electric trucks, ambulances and charging infrastructure.
Meanwhile, the PM-eBus Sewa-Payment Security Mechanism (PSM) scheme targets to help roll out over 38,000 electric buses till 2028-29 with an outlay of over Rs 3,435 crore. In the financial year 2025, the PM eBus Sewa’s allocation was Rs 500 crore.
Public transport authorities such as STUs procure electric buses through two models - gross cost contract (GCC) and outright purchase. Under the GCC model, operators manage the operation and maintenance of the buses, with STUs paying a per-kilometer cost.
STUs are not required to pay the upfront cost of the bus under the GCC model. However, STUs often find it difficult to procure and operate electric buses because of their high upfront cost and lower realization of revenue from operations. OEMs or operators are generally hesitant to engage in this model due to concerns about potential payment defaults.
Through the PSM scheme, the government expects to address this concern by ensuring timely payments to OEMs or operators through a dedicated fund. In case of default of payments, the implementing agency CESL will make necessary payments from the scheme funds which will be later recouped by the STUs.
The scheme will support the operation of electric buses for a period of up to 12 years from the date of deployment.
While the PM E-Drive provides direct upfront or operation cost subsidies to STUs or other entities buying an electric bus, PM-eBus Sewa, which focuses on cities with a population of less than 5 million, offers financial support based on per-km for operating electric buses.