The Centre’s decision to not extend the subsidies on electric buses will be factored into the cost structure in future bids of participants before they eventually pinch the pockets of the common traveler, say e-bus makers.
As against the first e-bus tender floated by the Centre-controlled Convergence Electric Services (CESL) in April last year, the lowest price bid stood below ₹44/km. The same has now zoomed 36% to ₹60/km in the latest tender because of absence of government subsidy.
Girish Wagh, executive director, Tata Motors said, “Even if the FAME subsidies are not there, it will lead to some increase in charge per kilometer and that will be part of the bids that all the OEMs will give. And that will then get translated into the ticket rates.” Wagh was speaking in a post earnings call.
The government had given their nod to 5,595 electric buses in the first tender of CESL. Tata Motors’ bids surprised other participants including PMI Electro and Olectra Greentech with its prices before it swept the tender.
The prices discovered in the first tender for a 12-meter bus was ₹43.49/km whereas for a 9-meter bus it was ₹39.21/km. These, CESL claimed, were at par with or very close to the operational cost of diesel buses.
Sharat Chandra, CFO, Olectra Greentech said, “With FAME subsidy, the average cost, let us say, is ₹50/km. With the subsidy no longer there, the cost is likely to go up. But even if the cost goes up to ₹100/km, there will continue to be a huge gap.” According to Olectra the cost of running a diesel bus for a state transport undertaking (STU) is ₹150/km.
“Till date, nothing has progressed on the initial contract, which was won by a competitor (Tata Motors). It was at very, very low at about ₹43-₹45/kilometer. Against that, the new contracts are significantly better off, at about ₹60 plus. The competitor has not bid for the new contracts,” Chandra added.
CESL’s last tender garnered lukewarm response as all companies, barring one, gave it a miss. The reason behind this was that the government wasn’t able to address OEM’s concerns around having a payment security mechanism in place.
“We did stay away from the second tender of CESL because we had requested for a payment security mechanism to the government, which didn’t get implemented. CESL floated a third tender where only one player bid. The payment security mechanism wasn’t there either and therefore that tender will be re-bid,” Wagh added.
A payment security mechanism is essentially a security fund that provides interest-free capital in case of default in payments. In the case of electric buses, the onus of unhindered payments to the service provider lies on the STUs. But most of the STUs are in financially bad shape. Electric bus makers are, therefore, asking the government to set up a security fund.
“The third tender where nobody has participated is based on dry leasing. Currently the model is wet lease, so dry lease means the drivers of the STU will be involved, which all the OEMs are not keen. They will not be under our control,” Chandra added.
