States want e-buses, but manufacturers worry about repayment: Official

States want electric buses for public transport but manufacturers doubt if their road transport undertakings (STUs) will make payments, said a senior civil servant on Thursday.

STUs are subsidised by state governments. “The question is if they are given these services as per the proposed model, will they be able to repay? If the ticket collections are there, will they not go into staff salaries or the general fund of the state government? Will they be used to pay back manufacturers?” said Giridhar Aramane, Union Road Transport and Highways Secretary.

Aramane spoke at Insight 2022, a conclave by Convergence Energy Services (CESL), a wholly owned subsidiary of Energy Efficiency Services (EESL), a ministry of power undertaking.

CESL brought these concerns to the ministry when it was asked to procure additional buses. Manufacturers have repayment liability to banks and they worry that defaults by STUs will lead to financial issues.

After more than 5,000 electric buses were readied in five states as part of the Grand Challenge scheme, there is a demand from other states for an additional 15,000. There is potential for 50,000 such buses.

“Manufacturers have to be provided the comfort of payment by STUs,” Aramane said. “We need to ensure that they’re protected from this risk.”

He proposed a model similar to Solar Energy Corporation of India (SECI), where there’s a tripartite agreement between state governments, power producers, and the Reserve Bank of India (RBI). The Centre steps in through RBI if a state government defaults on payment.

Another option proposed by international agencies is being examined. “They’ll provide concessional finance for a guarantee fund. The Government of India will have to borrow this money and establish the fund so that manufacturers can be reimbursed in case of a default.”

Cash-strapped STUs don’t have the financial capacity to buy electric buses. The first phase fleet of the Grand Challenge procurement scheme was tendered out on a gross cost-contracting model, wherein STUs procure service based on the terms and conditions defined in the tender document, followed by market price discovery.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor