Grand Challenge will have total subsidy of Rs 1,800 crore for 3,472 electric buses

Convergence Energy Services (CESL), a state-owned company, has floated an initiative called Grand Challenge, which aims to create a homogenised demand for 3,472 electric buses, across nine cities. CESL is a wholly-owned subsidiary of Energy Efficiency Services (EESL).

The total size of the subsidy to be provided under this scheme is Rs 1,800 crore, which will be provided to state transport undertakings operating in Mumbai, Delhi, Bengaluru, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat and Pune. Mahua Acharya, MD and CEO, CESL, spoke to Moneycontrol on this new initiative.

What role would CESL play in the Grand Challenge?

Acharya: CESL would pass on the subsidy, which belongs to the Department of Heavy Industries (DHI), but it is transmitted from here. The largest value addition we would be doing is that we will be merchandising the demand which is something not easy.

How are you getting the state transport undertakings (STUs) on board?

Acharya: Every STU has its own preference and we have been speaking to STUs, which in order to subscribe to the Grand Challenge, might have to give up some of their favourite conditions and accept the larger good. There is a bit of a compromise from every party. They would have to agree to certain conditions.

Could you explain what those conditions are?

Acharya: It’s like a certain minimum number of kilometres to be given to the OEM (original equipment manufacturer) to run the bus. The more the number of kilometres driven, the lower the price. Payment security is very big. Lot of OEMs load their cost on risk and perceived risk. We have to make demand more bankable.

Could you also explain what the rating system is?

Acharya: There are mandatory criteria in the Grand Challenge. Suppose a STU wants 500 buses and they agree to the criteria. If the demand for buses is higher than the subsidy available, we will rate the cities based on their ability to subscribe to these additional criteria, which will have enhanced payment security and additional kilometres. If they are willing to extend themselves through these additional criteria, they deserve more buses because they will be rated higher.

What is the total subsidy available for these 3,472 buses?

Acharya: The total package amount is Rs 1,800 crore.

What is the approximate cost of these buses?

Acharya: It costs roughly Rs 1.2 crore for a 9-metre bus and Rs 1.6 crore for a 12-metre bus.

In what configuration will the buses be available?

Acharya: There won’t be many configurations. That’s part of homogenisation of demand. The configurations that we have offered are those that work for all STUs. We have captured 85 percent of everybody’s demand.

How is this different from the earlier state-wise allotment of electric buses under different schemes?

Acharya: This scheme is under the FAME 2 remodeled scheme of the DHI. The subsidy here is based on opex (operating expenditure) basis, unlike the capex-based basis of earlier programmes.

With COVID-19 in the background, will there be enough ridership for such mass transit concepts?

Acharya: The problem is with delivery time. STUs don’t tell us that they don’t need the buses. They tell us that they don’t need the buses now. The passenger load in buses has come down because of COVID. But people are going to go back to buses because vaccination is happening. It’s a question of when the buses are needed. Most STUs which have had serious COVID-related hits on their balance sheets say that buses are needed, but later, may be 18 months from now.

The financial condition of most STUs is in bad shape. Isn’t that something to be worried about?

Acharya:  Yes, and that is the crux to making the conditions around bankability quite strong. That is the fundamental basis behind homogenising the demand and standardising the contractual terms and agreement.

Will this scheme be extended to private players?

Acharya:  We cannot comment on that right now. It’s only for public transport undertakings, as of now, and only for nine cities.

Can more cities be added in the future?

Acharya:  I am hopeful. We got a lot of requests asking us not to restrict it to just nine cities. Some cities have a real need and some cities do not have STUs but are fairly big in size. We will be more than happy to work with states. We will have to see how this goes and what kind of prices are found to be affordable.

Have any OEMs got in touch with you for this scheme? 

Acharya: We have had intense discussion with OEMs and equally intense discussions with STUs. We have two formal consultations and there are plenty that are bilateral.