New e-bus payment mechanism to bolster private participation in STUs: Switch Mobility's Mahesh Babu 

India's newly approved PM-eBus Sewa-Payment Security Mechanism (PSM) scheme is set to bolster private sector participation in the electric bus market, according to Mahesh Babu, CEO of Switch Mobility. 

The initiative aims to streamline the procurement and operation of e-buses by Public Transport Authorities (PTAs), enabling private operators to scale up their services. 

“We have been requesting the government to involve private operators, rather than OEMs, in running these buses within state transport units (STUs),” said Mahesh Babu. “I think that is also part of the scheme. The details are awaited, but it is going to help significantly to bring private players who will buy the buses from us and operate them for over 12 years. This will bring in many players,” he added, highlighting that increased competition and innovation would follow.

The PM-eBus Sewa-Payment Security Mechanism, approved on Wednesday, will facilitate the deployment of over 38,000 electric buses by 2028-29, supported by an outlay of more than Rs 3,435 crore.

Public transport authorities currently procure e-buses through two main models: gross cost contract (GCC) and outright purchase. Under the GCC model, OEMs manage the operation and maintenance of buses, with STUs paying a per-kilometre fee. However, STUs often find it difficult to procure and operate electric buses because of their high upfront cost and lower realisation 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 reimbursed 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. The PMS will help in easy financing considering that about 70% of the e-buses costs were funded by banks, while the rest would come in from equity from OEMs. 

Switch Mobility has secured 1,800 orders for electric buses under the current scheme, with deliveries expected over the next 8-12 months. The company has also delivered 350 light commercial vehicles and has additional orders in the pipeline.

Babu has previously advocated for a business model inspired by London’s approach, suggesting the separation of roles within the electric bus ecosystem. “Break down the system into distinct roles—operations, financing, asset ownership, and technology—allowing each entity to focus on its core strengths,” he said. This model, according to Babu, would accelerate the rollout of electric buses by leveraging the expertise of specialised players.

As India gears up for an electric transformation in public transport, the PSM scheme could prove pivotal in overcoming financial barriers and attracting private operators, setting the stage for a more competitive and innovative market.