Central Government's Payment Security Mechanism To Drive 1.5 Lakh Electric Bus Procurement, Here's All About It

The central government is developing a payment security mechanism (PSM) to facilitate the procurement of 1.5 lakh electric buses (e-buses).

This move aims to protect e-bus suppliers from financial risks associated with state transport utilities (STUs) that operate these buses, as per a report by The Economic Times.

Currently, e-buses are purchased by central agencies and then transferred to STUs for operation, with the STUs being responsible for reimbursing the bus manufacturers.

However, challenges such as inefficiencies in fare collection and inadequate bus maintenance have affected the viability of these operations.

E-bus suppliers have long requested a PSM backed by the central government to ensure their payment security.

In the interim budget for 2024-25, Finance Minister Nirmala Sitharaman announced plans to expand and strengthen the e-vehicle ecosystem, including supporting manufacturing and charging infrastructure and encouraging greater adoption of e-buses for public transport through a payment security mechanism.

Industry estimates suggest that an investment of Rs 1.2-1.5 lakh crore will be necessary to deploy 1 lakh e-buses.

The government is currently engaging with stakeholders to define the specifics of the PSM scheme, which will be activated in case of default by state governments or transport utilities in paying bus makers.

Presently, around 4,000 electric buses are operating in India, compared to a total of 15 lakh diesel and CNG buses in the country. In August 2023, the centre launched the PM-eBus Sewa Scheme, aiming to deploy 10,000 e-buses under a public-private partnership model, with an estimated cost of Rs 57,613 crore over the next decade.

Amit Goyal, chair of the PHDCCI Housing and Urban Development Committee, emphasised the importance of a rapid rollout of the PM-eBus Sewa scheme for 169 cities, particularly highlighting the significance of electric buses for smaller cities and hill stations.

Convergence Energy Services Limited (CESL), a green energy-focused venture of Energy Efficiency Services Limited (EESL), recently invited proposals for the selection of an operator to procure, supply, operate, and maintain 3,600 e-buses, as part of the PM-eBus Sewa scheme.