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August 10, 2023

How India could meet its electric vehicle target

India electric bus
As of May 2023, only 4,506 registered buses in India are electric, well below the country’s five-year target of deploying 50,000 electric buses (Photo: Money Sharma/AFP via Getty Images)

The Indian central government could develop a blended finance facility for electric buses that protects manufacturers from balance sheet and payment security risks, says the IEEFA.

Last year, India announced a target of deploying 50,000 electric buses over the next five years, an initiative that has been supported with $10bn of investment. But as of May 2023, only 4,506 buses, or 1.25 per cent of registered buses in India, are electric.

Manufacturers have been reluctant to take part in a recent electric bus tender owing to the risk of delayed payments by bus operators. A new report from the Institute for Energy Economics and Financial Analysis suggests that establishing an electric bus financing facility could be the answer to India’s problems.

The report highlights how a blend of public and private financing could reduce the cost of capital for this facility.

This facility would provide funds for electric buses for operators across Indian states, and secure electric buses from manufacturers. Operators would enter into lease agreements with the facility, allowing them to either lease the bus itself or just their batteries. 

This facility could also finance other vehicles, including zero-emission vehicles in the private sector, “making it a one-stop, zero-emission financing institution in India”.

The IEEFA envisages that the facility would be backed by a mix of private and public capital. Private money could come from commercial banks and sustainable bonds, while the government, as well as development finance and international public finance, could also contribute.

“This blend of public and private financing can significantly reduce the cost of capital for the financing facility, which is crucial for capital-intensive electric buses,” the IEEFA said. 

It added that as well as lease income, the facility could generate more revenue by selling carbon credits derived from the emissions avoided by leasing electric buses.

You can read the full report here.

A service from the Financial Times