The government’s efforts to electrify bus mobility across the country could hit a speed bump as manufacturers have started losing interest due to absence of payments assurances in tenders.
For example, Tata Motors, India’s biggest bus maker, did not take part in the ongoing ₹30,800 crore phase-I of the National Electric Bus Programme (NEBP) comprising 6,465 electric buses, steered by the government-controlled Convergence Energy Service (CESL).
The move came as a surprise since Tata Motors won two-thirds of the previous tenders last year where it committed to supply 3600 electric buses.
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In an interaction with FE, a senior official of the Mumbai-headquartered company said that unless a secured payment mechanism is established, which would address the concerns of the participating companies, it would rather sit out from all future tenders.
Girish Wagh, executive director, Tata Motors said, “After the first tender, we have been in discussions with the government about having a payment security mechanism by which the whole model becomes bankable. We made our position very clear a number of times that unless we have the payment security mechanism, we won’t participate.”
A payment security mechanism is essentially a payment 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 state transport undertakings (STUs). However, most of the STUs are in bad shape financially. Electric bus makers are, therefore, asking the government to set up such a security fund – something that already exists in the power sector.
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Sudhir Mehta, chairman and managing director, Pinnacle Industries, said, “The ability of companies to fund these tenders on their own balance sheets or on the lender’s, is going to be limited. If the government has to meet the ambition of 50,000 e-buses then we will need Rs 60,000-70,000 crore funding. No company will be able to take this on their own balance sheet.”
Pinnacle Industries, which is hoping to bag an order for supply of 310 such buses in the on-going tender, is among the handful of companies such as Ashok Leyland-backed Switch Mobility, JBM Auto and PMI Electro, who have participated in the tender.
Estimates state that only 3-4 STUs from the total of around 70 in the country are financially profitable. For FY20, Delhi Transport Corporation recorded a loss of Rs 5,280 crore while Maharashtra State Road Transport Corporation recorded a loss of 712 crore in the same year. During FY21, four road transport corporations in Karnataka made losses of Rs 4,540 crore, including the Bengaluru Metropolitan Transport.
Since sustained payments from STUs to bus service providers is under the cloud, banks have also developed cold feet for funding the purchase of these buses. The bus service providers can be a subsidiary of the bus makers too, which is the case at Tata Motors.
Mahua Acharya, former managing director, CESL said: “STUs have a bad payment record and poor financial health. The time it is going to take to reform their operations for changing to fully electric, you have to do something to secure bank lending. Until we show that these contracts (tenders) are bankable, we are going to have a very severe problem on our hands.”