PSM-backed EESL's 3825 e-buses tender sees participation from OEMs

Amid the government’s push to boost electric bus adoption through a payment security mechanism (PSM), Energy Efficiency Services Limited's (EESL) latest tender for the first tranche of 3,825 e-buses of the 10,000 electric buses under the government's most ambitious PM E Sewa scheme has seen active participation from original equipment makers. 

Major firms that have participated in India's first PSM-enabled tender include Tata Motors, Switch Mobility, PMI Electromobility and JBM Auto, industry sources told Autocar Professional. 

The latest tender floated by EESL opened on November 17 and closed today. Autocar Professional learns that the process of awarding the contract for 3,825 e-buses is likely to be completed before the end of this month as the model code of conduct kicks in ahead of General Elections.  

In January, EESL had to cancel its tender for 4,675 e-buses due to low participation by companies. Tepid response from OEMs was due to concerns including delays in payments, weak financial conditions of state transport undertakings, and the absence of a payment security mechanism.

However, the government launched a payment security mechanism with the United States in December to facilitate the deployment of 10,000 made-in-India electric buses by supporting OEMs in case of default by financially troubled state transport undertakings.

The Ministry of Heavy Industries has proposed a payment security mechanism, providing a three-month payment security to e-bus operators/OEMs in case of payment default by STUs. The mechanism aims to cover the procurement of up to 38,000 electric buses under the National E-Bus Program. 

How Industry is reacting to the first tranche of buses under PM E Bus Sewa

“We are thankful to the government for initiating PSM led PM eBus Sewa tender. This is a great move and will benefit the industry significantly. To my mind, this will help the entire industry and help in contributing towards the nation's net zero goals.” PMI Electromobility CEO Aanchal Jain told Autocar Professional.

The country’s largest commercial maker Tata Motors has also welcomed the payment security mechanism. "This makes the business case for e-buses bankable,” Chief Financial Officer PB Balaji said in a recent media call, signalling the company's intent to aggressively bid for e-bus tenders.

How the PSM mechanism works

The PSM mechanism has also encouraged banks to provide lending support to OEMs, who typically provide these buses on a per km gross cost contract basis. The PSM mechanism has given the OEMs the assurance that if any state transport corporation fails to pay the OEM, the PSM will intervene and support the default.

The payment security mechanism is also enabled with a unique debit mechanism, which ensures that if any STU defaults on the first three installments to the bus OEM, then the funds from the PSM mechanism will be given to the OEM without any questions asked.

Furthermore, if the STU continues to default for another three months, the Ministry of Heavy Industries, in collaboration with the Ministry of Housing and Urban Affairs, will invoke the debit mechanism, which will put the GST revenues due from the Centre to the state on hold for the total default. 

The lien will be released on the payment to the center's PSM mechanism, which has paid these funds in advance to the OEMs.

States onboarded for PSM under PM E- Bus Sewa

According to government sources, approximately ten states, including Assam, Bihar, Chandigarh, Gujarat, Haryana, Jammu & Kashmir, Maharashtra, Meghalaya, Orissa, Puducherry, and Punjab, have given their approval to the government's payment security mechanism.

In the current bidding round, approximately 520 7-meter electric buses, 2231 9-meter electric buses, and 1074 12-meter electric buses are expected to operate in 50 cities across India from the current bidding tranche.