CESL Study On E-Buses Claims Cost Savings Vs CNG, Diesel Buses, Even Without Subsidy

Highlights :

  • The cost savings with or without subsidy for e-buses against diesel and CNG buses without or without subsidy are 38% to 50%.
  • Even with ‘higher’ fuel costs right now, readers should be aware that a substantial reduction will not happen even if oil prices were to drop sharply, as per government policy. That strengthens the case for EVs further.


CESL Study On E-Buses Claims Cost Savings Vs CNG, Diesel Buses, Even Without Subsidy

Government-owned entity Convergence Energy Services Ltd CESL, which recently launched India’s largest e-bus tender, has shared a case study on the results of the bidding. This case study, which is based on a thorough market research conducted by CESL, WRI India, the World Bank, and others, highlights the key features of The Grand Challenge, which is globally the largest and most extensive tender to procure electric buses till date. India’s national electric bus program aims to deploy 50,000 e-buses and consolidate demand for these vehicles throughout the country.

The tender invited bids for five lots of buses encompassing 12m and 9m, AC and Non-AC buses. Bidders were asked to submit their price bids per-km assuming demand for subsidised buses. Tata Motors emerged at the L1 bidder for all the lots.

Benchmarking quoted costs across cities 

CESL observed that fixed costs involved in E-bus and charger purchase as well as financing are similar across cities of India. The variable costs, however, differ from one city to another. These could include, for example, staff remunerations, electricity costs etc.

For the benchmarking of price-bids across various cities, Delhi was assumed as the benchmark city for the discovery of price. Against this, the price was adjusted from city to city. Staff cost was taken as 30% of the cumulative cost of operations, and 30% of the per-km quote was regulated according to different cities in ratio of to the minimum wage rates of skilled labour in the city in question.

Notably, Delhi has the cheapest electricity tariff for Ev charging(INR 5.5 per-km inclusive of service charges).

CESL Grand Challenge Response

The Response To CESL Grand Challenge

Price discovery without subsidy

By combining  economies of scale and contractual improvement, it is observed that the the prices discovered for e-buses without subsidy are 23-27% lower than the current cost of diesel/CNG buses in the cities. When the subsidies are included, the prices stand at 31 to 35% lower. Factors such as an increase in fuel prices have impacted regular costs per km for diesel and CNG buses. Against this backdrop, electric buses would continue to be economical even following the stabilisation of oil prices.

“Further, CESL found that the prices discovered were lower by 28% (Surat) to 52% (Kolkata) compared to contracted prices under phase-1 of the FAME II program-18 months prior. ” This accounts for saving of over INR 10,800 Cr over a year of the corresponding contracts.

Cost Savings

One of the most important findings of the Grand Challenge is that the per-km prices (unsubsidised) discovered by the Grand Challenge are 23-27% lower than the present cost of diesel or/ and CNG bus services. With the inclusion FAME II subsidy, prices discovered are 31 to 35% lower. Hence, purchasing e-buses is the most cost effective approach for cities.

The cost savings with or without subsidy for e-buses against diesel and CNG buses without or without subsidy are 38% to 50%.

Let’s take the example of 12m low floor Ac bus. the Gross Cost Contract (GCC) cost per km for e-bus with subsidy is Rs 47.99. Without subsidy, its is Rs 53.35. For diesel bus it is Rs 95.14, while for CNG, it is 86.14.

Measures Recommended

The upfront capital cost of e-buses is a primary factor contributing to the delivery of e-bus services. This necessitates large-scale commercial financing and provision of access to it. Assurance with respect to payment timeliness is important to unlock this financing. Large institutional investors need to follow ESG norms. In addition to demand aggregation and Hence, de-risking financing is important for the expansion of the sector. To view the full case study, click here

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