Context: Finance Minister announced that government will introduce payment security mechanism for encouraging greater adoption of e-buses for public transport. In 2023, Ministry of Housing and Urban Affairs had introduced the PM eBus Sewa Scheme to boost India's electric mobility infrastructure in urban areas by supporting deployment of 10,000 electric buses through PPP model.
About PM eBus Sewa Scheme
- The scheme aims to increase the modal share of electric bus based public transport in India.
- It has two-components:
- Segment A: Augmentation of City Bus Services and Associated Infrastructure: Aims to augment city electric bus operations by extending Central Assistance for 10,000 electric bus operation on PPP model, bus depot and behind the meter power infrastructure.
- Segment B: Green Urban Mobility Initiative (GUMI): Aims to support implementation of GUMI projects for contemplating bus services and demonstrating reduction in GHG emissions in urban areas. It will include support for implementation of National Common Mobility Card (NCMC) based Automatic Fare Collection System (AFCS), bus priority infrastructure etc.
- Eligible Cities: 169 cities are eligible to benefit under the scheme. The cities will be selected through a 'challenge method'. Maximum number of bus to be allocated to different category of cities and central assistance per kilometer will be by the following method:
Central Assistance for bus operations
Note: Large metropolitan cities with population more than 1 crore are not eligible under the scheme.
- Central Assistance of ebuses on PPP model in urban areas will be provided on per kilometer basis for 10 years or upto March 2037, whichever is earlier.
- CA will be provided for assured kilometers and if buses operate less than the assured km, CA will be released in proportion to rate applicabel to under-utilised km. Operations beyond the assured kms will be borne by the city.
- All India aggregation of ebus operations will be done by Convergence Energy Services Limited (CESL) on Gross Cost Contract (GCC) - wet lease model.
- On furnishing Registered Vehicle Scrapping Facility (RVSF) Certificate for scrapping buses, equivalent number of buses may be considered for allotment.
- Payment Security Mechanism (PSM): According to the Scheme Guidelines, Payment Security Mechanism is part of the scheme. State Guarantee is to be provided for payment of bus operations and States/UTs will agree to PSM being developed by GoI. Payment Security will be provided to the Operator as per an agreement between
Need for Payment Security Mechanism
- A Payment Security Mechanism is a funded capital reserve that provides interest free working capital to its beneficiary projects in the case of a default event.
- Currently, around 90 Public Transport Authorities (PTAs/STCs/SPVs) operate around 1.50 lakh buses in India.
- Around 27,000 buses operate in urban areas while the remaining operate in 1.23 lakh buses serve intercity and district routes, catering to about 7 crore passengers daily.
- Cumulative losses of PTA stood at around Rs 1,22,300 attributed to low tariffs and high operational costs and low overall cost recovery for PTAs remaining around 74%.
- Thus, to address concerns like delays in payments and weak financial conditions of STUs/STCs, Ministry of Heavy Industry has proposed to introduce a Payment Security Mechanism similar to SECI for solar power operators.
- USA has committed to contribute $150 million (Rs 1,231 crore) grant for payment security mechanism to PTAs. Rest is expected to be contributed by Government for creation of Rs 3,453 crore payment security mechanism.
Benefits of Payment Security Mechanism:
- Reduces the perception and quantum of risk of OEMs/operators.
- Assured payment and de-risking of payments to the operators/OEMs.
- Improves credit rating of operators/OEMS and enables them to borrow at lesser interest rates.
- Foster widespread adoption of ebuses in India.
Proposed Payment Security Mechanism (PSM) for PM eBUS SEWA Scheme
- Ministry of Heavy Industries (MHI) for creating Payment Security Mechanism for electric buses funded by GOI Schemes by facilitating a dedicated Payment Security Fund (PSF).
- The scheme has two components:
- Payment Security to the operators/OEMs as per the concession agreement signed between Public Transport Authority (PTA) and the operators/OEMs for procurement and operation of e-buses.
Consent of State/UT for Direct Debit Mandate (DDM):
- Triggering of Payment Security Mechanism: In case of delay/non-payment (default by PTA) of bill by PTA within the prescribed time as per concession agreement.
- Disbursement from Payment Security Fund (PSF) by CESL: CESL will approve the disbursement of funds in the escrow to the extent of default.
Repayment Mechanism of PSF by PTAs:
- PTAs will repay the entire amount along with bank interest within 90 days from date of disbursement from PSF.
- In addition, Late Payment Surcharge @3% per annum based on number of days of delay will be applicable to PTA.
Invocation of DDM by RBI:
- If the PTA does not reimburse the PSF even after 90 days, CESL will report the matter to Steering Committee of PSM under MHI to invoke DDM.
- Based on the committee's recommendation, MHI would invoke DDM by informing RBI. The RBI would debit the entire amount from the current account of State/UTs and transfer the same to PSF.
Importance of the PM eBUS SEWA scheme
- Contribute to decarbonization of transport sector reducing to greenhouse gas emissions.
- Help India to achieve net-zero emissions by 2070.
- Mainstreaming of electric buses in the urban mass transport.
- Reduce the usage of diesel, which is the most common fuel used by buses thus protecting from pollution and imports of crude oil saving precious forex reserve.
- Promote domestic manufacturing of ebuses.
About Convergence Energy Services Limited (CESL)
- CESL is a wholly owned subsidiary of Energy Efficiency Services Limited (EESL).
- It is investing in clean energy and clean transportation for delivering affordable and reliable energy at scale.
- CESL focuses on business models focusing on optimising assets, monetising and stacking multiple values and using innovative financial structures to deliver at scale.
- Core focus of CESL is on promoting electric mobility in India and increase rural energy access.
Key Program of CESL:
- Gram Ujala Program
- National E-Mobility Program
- Electric Vehicle Public Charging Infrastructure
- PM eBUS SEWA Scheme