Fame III: Govt Plans To Replace 8 Lakh Diesel Buses with Electric Ones

The government is formulating a plan to replace approximately 800,000 diesel buses, constituting about one-third of the total buses plying on roads, with electric ones within the next seven years. This initiative aims to transform the public transport system, contribute to environmental sustainability efforts, and give a boost to the country's electric vehicle (EV) sector.

The proposed strategy, as stated by sources, involves deploying 200,000 electric buses for state transport undertakings (STUs), 5,50,000 for private operators, and 50,000 specifically for schools and employee transportation by the year 2030.

Beyond addressing environmental concerns, the move to replace diesel buses aligns with the Faster Adoption and Manufacturing Electric Vehicles (FAME) incentive program initiated by the Ministry of Heavy Industries in 2015. FAME II, with a funding of INR 10,000 crore over three years, is set to conclude at the end of the current financial year in March 2024. The government is actively working on FAME III, exploring the potential inclusion of production-linked incentives (PLI) schemes with a focus on prioritized lending to the country's EV industry.

From EV Infra To Jobs

The transition to electric buses is anticipated to expedite the establishment of a widespread charging infrastructure, attract investments, achieve economies of scale, lower per-unit costs, and generate employment within the manufacturing sector.

Estimates suggest that a capital investment ranging from INR 1.2 to 1.5 trillion may be necessary to implement the rollout of 1,00,000 electric buses at current market prices. Engaging with stakeholders, the government is in the process of finalizing the details of the proposed scheme, likely to be unveiled in the upcoming financial year.

Joint Payment Security Mechanism

Discussions have focused on aggregating and converting demand through large-scale procurement tenders, aiming to drive down costs per unit and streamline distribution to existing transporters. Presently, there are approximately 4,000 operational electric buses on Indian roads, as compared to the fleet of 2.3 million diesel and CNG buses.

The initiative coincides with the recent announcement by the Indian government, in collaboration with the US, to establish a joint Payment Security Mechanism (PSM). This mechanism aims to facilitate the deployment of 38,000 electric buses in the country to align with net-zero targets. 

Additionally, the government aims at introducing 50,000 electric buses over the next five years through the National Electric Bus Program (NEBP), contributing to the reduction of crude imports and addressing vehicular pollution. The PSM is expected to ensure timely payments from financially constrained state transport companies, expediting the electrification of the national bus fleet.