India's e-bus ambition hits financing speed bump

Jbm Auto

17/12/2022 09:07

By Sarita Chaganti Singh
       NEW DELHI, Dec 17 (Reuters) - Indian banks are reluctant
to lend to electric-bus makers for supply to ailing state
transport operators over concerns on recovery of dues, hurting
the country's goal of curbing vehicle  emissions, said banking,
industry and government sources.
    The lack of funding is limiting the ability of e-bus makers
to participate in federal government tenders to supply to
states, the sources told Reuters, threatening to slow the
electrification of major public transport now reliant on diesel.
    India wants to deploy 50,000 e-buses in tranches over the
next four to five years at an estimated cost of one trillion
rupees ($12 billion).
    As of now, 6,740 e-buses have been approved by the federal
government that provides incentives for related infrastructure,
of which nearly a third have been deployed in states.
    A senior bank official, who did not wish to be named, said
it was risky to lend to manufacturers to build buses for the
so-called state transport undertakings (STUs), as many are in
bad financial condition because they are often forced to keep
fares low.
    Mahesh Babu, chief executive of e-bus maker Switch Mobility,
said that "most of the contracts related to STUs are seen by
banks as high risk" and called for payment security for bus
makers.
    "There have been no instances of default in India though
there are delays," said a STU official in north India, but added
that "a payment security mechanism may instill confidence among
lenders".
    Each electric bus costs 12.5 million rupees ($151,138),
about five times that of a diesel one. Financing diesel buses is
safer because in the case of any default, banks can repossess
the asset and easily redeploy it. E-buses, however, need
charging and other infrastructure that may not be available
everywhere, said another banker.
    Nevertheless, the government-run Convergence Energy Services
Ltd, which aggregates demand from states for electric vehicles,
on Thursday issued a tender to procure 6,450 e-buses - the
country's largest so far.
    Switch Mobility, PMI Electro, JBM Auto  JBMA.NS  and the EV
arm of truck maker Ashok Leyland  ASOK.NS  responded to the
latest tender. But notable exceptions were Tata Motors
 TAMO.NS , India's largest commercial vehicle manufacturer, and
Olectra Greentech  OLEC.NS , the Indian technology partner of
Chinese auto major BYD  002594.SZ , two sources said.
    A Tata Motors spokesperson said there was a need for
"adequate safeguards with appropriate payment security
mechanisms" to make such ventures bankable. The company would
look at participating in future tenders once such measures are
in place, the spokesperson said.
    Olectra did not respond to an email seeking comment.
    The road transport sector accounts for 13% of carbon
emissions in India. Buses are one of the most significant modes
of public transport in India and STUs own and operate 150,000
buses that carry 70 million passengers daily.
    A federal government official, on the condition of
anonymity, said they would consider the demands of the industry.
    The Ministry of Heavy Industries, which is promoting the use
of e-buses, did not immediately respond to a email seeking
comment.        
    ($1 = 82.7060 Indian rupees)
 (Reporting by Sarita Chaganti Singh; Editing by Michael Perry)
 ((Sarita.ChagantiSingh@thomsonreuters.com;))