The Union Cabinet Confirms to the PM-eBus Sewa-Payment Security Mechanism (PSM) Proposal

Nitin Konde, Varun Bhardwaj

Sep 12, 2024 — 2 min read

PM-eBus Sewa-Payment Security Mechanism

With an outlay of INR 3,435.33 crore, the "PM-eBus Sewa-Payment Security Mechanism (PSM) scheme" for the procurement and operation of e-buses by Public Transport Authorities (PTAs) has been approved by the Union Cabinet, which was headed by the Prime Minister Narendra Modi.

From fiscal year 2024-25 to fiscal year 2028-29, this initiative will facilitate the deployment of over 38,000 electric buses (e-Buses). The operation of e-buses will be supported by the PSM scheme for a maximum of 12 years from the date of deployment.

The Move Aims to Create Healthy Environment

The majority of buses operated by Public Transport Authorities (PTAs) are currently powered by diesel/CNG, which has a harmful environmental impact. Conversely, electric buses are more environmentally friendly and incur reduced operational expenses. It was, however, anticipated that Public Transport Authorities (PTAs) would encounter difficulties in the procurement and managing administration of e-buses due to their high initial cost and reduced revenue realisation from operations.

Public Transport Authorities (PTAs) implement these buses through the Public Private Partnership on Gross Cost Contract (GCC) model in order to mitigate the substantial capital expenditures associated with e-buses. Under the GCC model, the PTAs are not obligated to pay the initial cost of the bus. Rather, OEMs/operators can operate e-buses for PTAs by accepting monthly payments. OEMs/operators are, however, apprehensive about participating in this paradigm because of their apprehensions regarding potential payment defaults.

A dedicated fund is established to guarantee that OEMs/operators receive payments in a punctual manner, thereby addressing this concern. In the event that PTAs fail to make payments, CESL, the implementing agency, will make the requisite payments from the scheme funds. These payments will be recovered by the PTAs/State/UTs at a later date.

The Initiative Will Also Encourage the Use of Electric Trucks

The scheme will also provide an allocation of INR 500 crore to encourage the adoption of electric vehicles and INR 780 crore outlay to modernise testing agencies for the EV ecosystem.

WRI India's executive programme director for integrated transport, clean air, and hydrogen, Pawan Mulukutla, stated that the Cabinet's approval serves as a reminder of India's ambitious decarbonisation objective in the transport sector, which involves the deployment of 50,000–60,000 e-buses in the coming years through initiatives such as the National Electric Bus Programme and the PM-eBus Sewa. This was imperative to enhance the project's bankability and secure the continued involvement of private stakeholders, who were previously apprehensive about the possibility of delayed payments or defaults. He stated that this will ultimately lead to a reduction in operational costs as a consequence of increased competition.