India's ambitious push to electrify public transportation is encountering significant resistance from bus manufacturers, who are raising serious concerns about the current tender model being used for the massive rollout of electric buses across the country.
The Massive E-Bus Tender Initiative
State-run Convergence Energy Services Ltd (CESL) is preparing to open bids for 10,900 electric buses across five major Indian cities: Delhi, Hyderabad, Ahmedabad, Surat, and Bengaluru. This initiative falls under the PM E-Drive scheme, with additional large tenders planned for Mumbai and Pune in subsequent phases.
The tender process has experienced multiple delays, with the most recent postponement pushing the bid opening to 14 November due to the festive season. Earlier in June, the tender was deferred because participants found the terms too expensive and stringent, while states lacked adequate infrastructure to accommodate such a large fleet of e-buses.
Understanding the PM E-Drive Scheme
The PM E-Drive scheme represents a crucial component of India's green transportation strategy with a substantial ₹10,900 crore outlay. Approximately 40% of this budget, amounting to ₹4,391 crore, has been allocated specifically to incentivize the deployment of 14,028 e-buses across nine cities.
To make electric bus operations more feasible for state transport authorities, the central government is subsidizing 20-35% of the procurement cost for each bus, which typically exceeds ₹1 crore. The government has also established additional safeguards, including a ₹3,400 crore Payment Security Mechanism (PSM) fund to protect manufacturers from payment defaults by state governments.
The GCC Model Controversy
The core of manufacturers' concerns lies in the Gross Cost Contract (GCC) model mandated under the PM E-Drive scheme. This operational expenses model requires manufacturers to own, operate, and maintain the buses while receiving payment based on per-kilometer usage rates determined through competitive bidding.
This approach contrasts sharply with dry lease contracts, where manufacturers own and maintain the buses but state transport authorities handle operations. The GCC model makes the business extremely capital-intensive for manufacturers, significantly impacting their balance sheets by keeping asset ownership on their books.
Tata Motors, a major player in the commercial vehicle sector, has publicly expressed its reservations about this model. A company spokesperson revealed that Tata Motors had skipped previous tenders due to the asset-heavy nature of the GCC approach. The company has consistently advocated for including asset-light models and robust payment security mechanisms as fundamental requirements for a financially viable business model.
Despite these concerns, Tata Motors plans to re-enter select tenders through a consortium model while awaiting clearer guidelines on asset-light mechanisms. The company has already supplied over 1,400 e-buses in 2024 and more than 200 in 2025, according to government data.
Broader Implications for India's E-Bus Ambitions
Industry experts emphasize that bus manufacturing and bus operation represent fundamentally different businesses requiring distinct skill sets and cash flow structures. Anurag Singh, advisor at management consultancy Primus Partners, suggests that a more flexible approach could help alleviate manufacturers' anxieties.
India's e-bus adoption stands at a critical juncture as the country works toward its 2070 net-zero carbon emissions target. Electric buses offer significant environmental advantages since they operate throughout the day, substantially reducing vehicular emissions compared to privately owned vehicles used only during specific time periods.
While the government's new safeguards—including subsidies, payment security, and demand aggregation—address some historical challenges, industry stakeholders believe that until tendering models become more sustainable, India's ambitious e-bus transition may struggle to gain full momentum.
