No automakers take part in Rs 5,000 crore cr tender for E-Bus

Industry stakeholders said lack of funding – with banks unwilling to lend for supplying these more expensive buses to ailing State Transport Undertakings (STUs) on recovery concerns – is restricting participation. Electric buses cost 3-4 times more than diesel ones, and in case of non-payment cannot be seized and redeployed freely due to the lack of a widespread charging infrastructure.

A senior industry executive who did not wish to be identified said unless a payment security mechanism is put in place, availability of capital will continue to be a challenge. “Companies would have these assets on their balance sheet for 12 years. Most STUs are ailing. Unless there is a payment security mechanism in place, who would want to take such a risk?” he said.

In response to a query from The Economic Times, CESL said, “We agree that payment security mechanism is one of the concerns expressed by the OEMs & suppliers in the ongoing tender of CESL. We are proactively consulting states, OEMs and central ministries to develop a feasible solution to ensure release of timely payments which will be beneficial to all the stakeholders.”

As per the gross-cost contract model, bus manufacturers are required to operate and maintain the electric buses supplied for a period of 12 years in lieu of a per km fee charged to STUs. Banks and financial institutions though remain wary of financing these deals given the poor financial health of these STUs.

“There are three kinds of risk here – operating risk, balance sheet risk and cash flow risk”, P B Balaji, Chief Financial Officer at Tata Motors explained in a recent interaction. While the company is comfortable with taking on operating and balance sheet risks to an extent, he pointed out it is not so with the collection risk.