India has been working towards the ambitious goal of achieving net zero greenhouse gas emissions by 2070.¹ With the transport sector accounting for 12 percent of energy-related emissions in India², e-buses offer a sustainable transport alternative to cut back on emissions and shift road travel to public transport. With anticipation brewing over the Faster Adoption and Manufacturing of Electric Vehicles India (FAME) III, it is an apt time to look at FAME I and FAME II to understand the progress and potential of e-buses and electric vehicles (EVs) in India.

The central government’s Department of Heavy Industries (DHI), intending to hasten the adaptation into electric vehicles (EVs), launched the Faster Adoption and Manufacturing of Electric Vehicles India (FAME) which pioneered the shift to EVs in India in 2015.

EVs like e-buses are cheaper than their Internal Combustion Engine (ICE) counterparts over their lifetimes owing to lower fuel and maintenance costs. Despite this, e-buses still require large upfront investments and can cost up to two to three times that of a diesel bus.

The FAME scheme was thus launched to reduce the up-front cost of an EV³. FAME I, which came into effect in April 2015 and was extended beyond its two-year term until 2019 had an initial outlay of ₹8.95 billion⁴ and it sanctioned 465 e-buses for eleven cities. In its second iteration, DHI announced a larger outlay of  ₹100 billion to support 7,090 e-buses⁵ out of which 6,862 have been sanctioned.⁶

Among several factors, the primary factor hindering State Transport Undertakings (STUs) from utilising its e-bus fleet efficiently is the absence of a robust charging infrastructure. Under FAME I, DHI sanctioned 520 charging stations of which 452 were installed.

For FAME II, 7,580 stations were planned, but only 2,877 were sanctioned and just 148⁷⁸ are operational. The government clearly overestimated its capability to install a robust charging network in the absence of clear coordination between the DHI and vehicle and charging infrastructure makers, as there is yet to be a policy establishing a charging standard for all EVs in the country.

High utilisation of e-buses, due to smaller fleet sizes, requires multiple daily charges, complicating route planning and favouring shorter routes. Increasing battery capacity could be a potential solution but it would have negative implications for the Total Cost of Ownership (TCO) and would also entail a smaller seating capacity and increased weight owing to a larger battery size.⁹

The inadequacy of the existing charging infrastructure, therefore, hinders the optimal utilisation of the existing e-bus fleet and worsens the already existing range anxieties, as many STUs do not find overnight charging sufficient enough to meet the required daily kilometres.

In Nagpur, for example, 34 percent of e-buses sat idle due to a lack of prolific charging infrastructure. Battery swapping has been tested but in cities like Ahmedabad, it only increased range anxiety and reduced operating efficiencies as the operational kilometre per swap was only about 40 kilometres while STUs seek a daily operational distance of at least 140 kilometres. The next phase should thus prioritise expediting the installation of charging stations along highways and major routes to alleviate range anxiety and ensure optimal e-bus usage.

Under FAME II, companies could avail subsidies to the tune of 40 percent of the cost, if the EV was manufactured using locally sourced parts under the Phased Manufacturing Programme (PMP). This programme came under scrutiny after about seven companies were caught falsely claiming to have either used imported parts while claiming them to be locally sourced or underpriced their vehicles to qualify for subsidies by selling chargers and software separately.

While most of the issues were with electric two-wheelers, an audit by the Automotive Research Association of India found that PMI Electro Mobility Solutions Pvt. Ltd used imported parts in its e-buses while claiming subsidies. While the subsidy was launched with the objective of reducing import dependence and promoting local manufacturing capability, it has been met with roadblocks as technology for EVs is still at its nascent stage in India. It is also unlikely to solve the core issue of reducing import dependence as most of the critical components including the motor, vehicle control unit and even wiring harnesses and connectors for e-buses are imported.

Indian firms also currently only assemble battery packs while the cells have to be imported due to limited lithium resource potential in the country. The policy thus does not adequately address the trade-offs associated with strict localisation as without the capacity to produce essential e-bus parts, companies will have to import components with high tariffs, increasing up-front costs. The government therefore needs to only gradually scale up import duties to encourage local EV technology while focusing on developing the right conditions that encourage innovation for manufacturers to develop EV parts locally.

Thus while the FAME schemes have played a pivotal role in kickstarting EV adoption by providing incentives, significant challenges persist. FAME III must continue to work on addressing charging concerns and must keep up the momentum of increasing the density of charging stations across the country. It must also ease the emphasis on strict localisation and focus on creating the conditions for original equipment manufacturers to build domestic manufacturing capacities.

It is also worth noting that India still faces the challenge of creating inclusive and efficient public transport and thus while the scheme can incentivise the purchase of e-buses amongst STUs, upcoming policies need to focus not only on building an e-bus fleet but also incentivizing its use among private vehicle users.

Blog written by Indulekha Suresh, Research Intern at Centre for Public Policy Research.

References :

1. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1945472 ↩︎
2. https://iced.niti.gov.in/climate-and-environment/ghg-emissions/energy ↩︎
3. https://www.itdp.in/wp-content/uploads/2022/10/Status-of-E-buses-in-India.pdf ↩︎
4. https://pib.gov.in/PressReleasePage.aspx?PRID=1795444 ↩︎
5. https://www.orfonline.org/wp-content/uploads/2022/03/ORF_PolicyReport_Electric-Buses.pdf ↩︎
6. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1982777 ↩︎
7. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2003003 ↩︎
8. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1984097#:~:text=The%20details%20of%20sanctioned%20e,FAME%20India%20Scheme%20phase%2DII ↩︎
9. https://www.orfonline.org/wp-content/uploads/2022/03/ORF_PolicyReport_Electric-Buses.pdf ↩︎

Views expressed by the author are personal and need not reflect or represent the views of the Centre for Public Policy Research.