Grand Challenge: Rs 5,500 Crore Tender Floated To Procure 5,580 Electric Buses; Vehicles Will Be Deployed In Big Cities

State-run Convergence Energy Services Limited (CESL) floated a unified tender on 20 January 2022 for procuring 5,580 electric buses including 130 double deckers. The tender worth Rs 5,500 crore is claimed to be the biggest order for electric buses yet and has been named the 'Grand Challenge'.

The Grand Challenge is based on standardising tendering conditions in diverse cities. This is the biggest ever scheme in the world, and is based on an innovative, asset-light model that makes it possible for state transport utilities (STUs) to deploy affordably and at scale, the company said.

The cities to be covered under the Grand Challenge in the first phase are Bengaluru, Delhi, Hyderabad, Surat, and Kolkata. The first lot of e-buses are expected to hit the road by July this year, according to the company.

According to CESL, the benefits of participating in the Grand Challenge include lower prices realised due to aggregate demand, high quality benchmarked technology, access to Faster Adoption and Manufacturing of Hybrid and Electric Vehicles-II (FAME-II) incentives, access to state incentives, air quality improvement, and access to domestic and international sources of finances.

Why The Push

The demand aggregation is part of Phase-II of the FAME scheme and the nine cities targeted for electric buses are namely, Mumbai, Delhi, Bengaluru, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat and Pune.

Energy Efficiency Services Limited (EESL) through its wholly owned subsidiary CESL undertook consultations with STUs, state governments, original equipment manufacturers (OEMs), NITI Aayog etc, to aggregate demand for electric buses for deployment on operating expenses (OPEX) basis across nine major cities in India having population over 4 million.

Urban Mobility Transition

Ministry of Heavy Industries (MHI) had formulated a scheme for faster adoption and manufacturing of (hybrid) electric vehicles in India (FAME India) in 2015, with an aim to reduce dependency on fossil fuels and to promote electric vehicles (EVs).

Demand incentive is an important component of the scheme which directly helps in demand generation of EVs by way of reducing the cost of acquisition of such vehicles. Demand incentive is available for consumers (buyers/end users) in the form of an upfront reduced purchase price of hybrid and electric vehicles to enable wider adoption, which is reimbursed to the OEMs by government of India.

At present, Phase-II of the scheme is being implemented for a period of five years with effect from 1 April 2019 with a total budgetary support of Rs 10,000 crore. This phase focuses on supporting electrification of public and shared transportation and aims to support, through subsidies, 7090 e-buses and 5 lakh e-3 wheelers.

According to the scheme guidelines, demand incentives for electric buses are provided only on operational expenditure model adopted by state/city transport corporation (STUs) and other public entities working in the transport sector.

OPEX Model

Under the operating expense (OPEX) model, also called the wet lease model, the transit authority procures the EV from fleet operators and pays for service on a per-kilometre basis. The authority or owner keeps the fare revenue, handles scheduling, routing, service standards. The operator oversees operations and maintenance.

The transit authority assumes revenue risk, whereas financial, technology, and operational risks are borne by the operator.

The major drawback with this model is that it relies on institutional capacity and inter-agency coordination and requires greater technical assistance.

The NITI Aayog, the government think-tank responsible for the push towards EVs in India, released a Model Concessionaire Agreement (MCA) document in 2018 for introducing electric-bus fleet in cities for public transportation on public-private partnership (PPP) mode on operational expenditure (per km basis) model rather than paying upfront capital cost.

Under this model, "the concessionaire shall be required to incur the necessary capex for procurement of electric buses, and operation and maintenance (O&M) infrastructure, while the (transport) authority shall incur operational expenditure on per km basis,” it said in a notification introducing the MCA.