Since 2017, the Faster Adoption and Manufacture of (Hybrid) and Electric Vehicles (FAME) scheme has been trying to incentivise electrification of bus fleet through capital subsidies. While FAME-I did not mandate the contracting model, FAME-II required buses to be procured and operated under the Gross Contract Model (GCC).
However, several contractual, tendering, and commercial challenges existed in the GCC model that affected the bankability and scalability of e-bus procurement. Therefore, along with its prime consultant, Spoctech Solutions, Steer was commissioned by the World Bank to prepare recommendations to improve RfP and MCA of the existing model and alternative business models.
Together with Spoctech Solutions, Steer studied gaps in the existing contractual framework to crystallise key challenges. This was based on extensive stakeholder consultations with existing bus operators, international fleet operators, state transport undertakings (STUs), financiers, charging infrastructure players and OEMs.
Based on the findings, our team first proposed modifications to contractual terms, including the need for reducing subsidy guarantee, capping of penalties, fee revision linked to inflation and bid timelines while improving payment securities and readiness of the authority. Then, to overcome the high capital cost of the e-bus compared to diesel buses, our team recommended alternate business models based on unbundling of fleet provision through a distinct creditworthy fleet aggregator and unbundling of charging infrastructure provision through charging-as-a-service providers.
The recommendations were ultimately presented to NITI Aayog over multiple workshops by the World Bank and our team. Our team’s estimates were contingent on the implementation of key enabling levers; the fleet aggregator business models could provide total cost of ownership (TCO) savings in the range of 20-30% through economies of scale achieved in procurement, financing and maintenance.
In June 2021, the Department of Heavy Industry issued a corrigendum in the ‘FAME India Phase II’ scheme allowing EESL, a joint venture of four public sector undertakings of the Government of India, to aggregate e-bus fleet demand across nine four million-plus cities.
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