FAME III: India to replace 800k diesel buses with electric over 7 years

To drive EV adoption in India, the government is devising a plan to replace nearly one-third of diesel buses on roads

The government is devising a plan to replace 800,000 diesel buses, which make up around one-third of all buses on roads, with electric ones over the next seven years, according to a report by The Economic Times (ET). This initiative is designed to transform the public transport system, contribute to environmental sustainability initiatives, and boost the electric vehicle (EV) sector in India.

The replacement strategy would involve deploying 200,000 electric buses for state transport undertakings (STUs), 550,000 for private operators, and 50,000 for schools and employee transportation by 2030, according to government sources quoted by ET.

Replacing diesel buses will not only address environmental concerns but also contribute to building India's EV sector, aligning with the broader Faster Adoption and Manufacturing Electric Vehicles (FAME) incentive programme. The FAME India scheme was initiated in 2015 by the Ministry of Heavy Industries. In 2019, the scheme received funding of Rs 10,000 crore for a period of three years. The official deadline for FAME II will be at the end of the ongoing financial year in March 2024. The government is already working on FAME III, which may also include production-linked incentives (PLI) schemes with priority lending to India's EV industry.

Other benefits of electric buses would accelerate the establishment of widespread charging infrastructure, attract investments, achieve economies of scale, reduce per-unit costs, and generate employment in the manufacturing sector.

A capital investment of Rs 1.2-1.5 trillion may be required to roll out 100,000 electric buses at current prices. The government is currently engaging with stakeholders to finalise the details of the scheme, which may be unveiled in the next financial year.

Discussions have focused on aggregating and converting demand through large procurement tenders to drive down costs per unit and facilitate distribution to existing transporters. Presently, around 4,000 electric buses are operational on Indian roads, compared to 2.3 million diesel and CNG buses.

The proposed initiative coincides with the recent announcement by the Indian government, in collaboration with the US, to establish a joint payment security mechanism (PSM) for deploying 38,000 electric buses in the country to achieve net-zero targets. The government also aims to introduce 50,000 electric buses over the next five years under the National Electric Bus Programme (NEBP) to reduce crude imports and combat vehicular pollution. The PSM will ensure timely payments from financially constrained state transport companies, expediting the electrification of the national bus fleet.