India’s recently approved PM-eBus Sewa Payment Security Mechanism (PSM) is poised to enhance private sector involvement in the electric bus industry, according to Mahesh Babu, CEO of Switch Mobility. The initiative aims to simplify the procurement and operation of electric buses by Public Transport Authorities (PTAs), encouraging private operators to expand their services.
“We have long urged the government to involve private operators, rather than OEMs, in managing the buses within state transport units (STUs),” said Babu. “It seems this scheme incorporates that request. While we await further details, it will significantly help attract private players who will purchase the buses and operate them for over 12 years, fostering competition and innovation.”
The PM-eBus Sewa-Payment Security Mechanism, approved recently, will facilitate the deployment of over 38,000 electric buses by 2028-29, supported by an investment of more than Rs 3,435 crore.
Currently, PTAs acquire electric buses through two main models: the gross cost contract (GCC) and outright purchase. Under the GCC model, OEMs are responsible for operating and maintaining the buses, while STUs pay them a per-kilometre fee. However, the high upfront costs and low revenue generation from operations often deter STUs from procuring electric buses. Concerns over payment defaults also discourage OEMs and operators from engaging in this model.
The new PSM scheme addresses these concerns by guaranteeing timely payments to OEMs or operators through a dedicated fund. In case of any default, the implementing agency, CESL, will cover the payments from the scheme funds, which will later be reimbursed by the STUs.
The scheme supports the operation of electric buses for up to 12 years from deployment. By securing payments and reducing financial risk, it is expected to ease financing, considering that approximately 70% of electric bus costs are funded by banks, with the remainder coming from OEM equity.
Switch Mobility has already secured orders for 1,800 electric buses under this scheme, with deliveries scheduled over the next 8 to 12 months. The company has also delivered 350 light commercial vehicles, with additional orders in the pipeline.
Babu has advocated for a business model akin to London’s, where the roles within the electric bus ecosystem are separated. “By dividing the system into distinct roles—operations, financing, asset ownership, and technology—each entity can focus on its core strengths,” he explained. This approach, according to Babu, would accelerate the rollout of electric buses by utilizing the expertise of specialized players.
As India moves towards an electric revolution in public transportation, the PSM scheme is set to play a crucial role in overcoming financial hurdles and attracting private operators, paving the way for a more competitive and innovative market.
