NITI Aayog Open to Private Electric buses in Cities

The government’s primary think-tank NITI Aayog recently issued a draft for a concession agreement for operation and maintenance of electric buses in Indian cities under for public private partnership (PPP).

The National Institute of Transforming India (NITI) Aayog will look to promptly introduce electric-buses in cities for public transportation on PPP mode on an operational expenditure model i.e. per km basis. The institution has undertaken the initiative to provide a model concession agreement (MCA) for the same as soon as possible. The draft is open for comments and suggestions up to October 4, 2018. A stakeholder’s meet will be held on October 12, 2018, to discuss the concession agreement before it can be finalized.

Some of the key highlights from the draft agreement were:

• The operator will be solely and exclusively responsible for all drivers, employees, workmen, personnel and staff employed for the purposes of implementing the project.
• Operator will bear the risk of loss in relation to each bus for the performance of its operation and maintenance obligations.
• Operator will provide for charging infrastructure at the maintenance depots for a specified minimum number of buses and provide adequate infrastructure for metering of consumption of electricity at each of the individual charging stations.
• The authority will pay the lump sum amount due and payable for each of the funded works to the operator in four installments. Upon the operator completing about 30 percent, 60 percent, 80 percent and 100 percent of the respective funded works.
• If the contract is terminated before the completion of funded works, the authority will pay to the operator 75 percent of the fair value of the funded works undertaken until the transfer date, if such termination occurs on account of an operator default or a non-political event.
• The concessionaire (license or permit holder) will be required to incur the necessary capex for procurement of the e-buses and O&M infrastructure, while the authority will incur operational expenditure on per kilometer basis.

The draft has been issued with the view of providing cleaner, more efficient and affordable public transportation. The objective is to provide operation and maintenance (O&M) efficiency of the city bus fleet for the authority, while ensuring bankability of the project for the private sector.

Last month, we reported that an inter-ministerial panel finalized the next stage of the roadmap for the FAME India scheme with an outlay of around Rs 5,500 crore spanning over five years and subsidy support for all types of electric vehicles (EVs).

While the idea is obviously  worthwhile for the simple reason that a well crated policy with the right incentives for private sector participation will ensure a faster roll out possibly, past experience with private operators suggests its own share of risks. The per kilometre payment system for instance, has frequently led to the sight of private operator buses indulging in reckless driving to meet their internal ‘targets’. The dreaded ‘redline’ buses of Delhi are just one memory of such a system.

On the other hand, making participating conditions too onerous risks leaving the field limited to established corporates and operators, that in turn price services too high.  As we have repeatedly seen across sectors, be it airports, highway tolls and more.  All in all, it will be a tough choice to make, between allowing operators to make a fair margin, without fluffing up their operating costs too much. Heading into an election year, don’t pitch your hopes to high on this for now.