Tata Motors emerges lowest bidder for electric buses in CESL tender

Tata Motors & Uber partnership

Tata Motors has emerged as the lowest bidder in the mega tender for 5,450 electric buses floated by Convergence Energy Services Ltd (CESL) under the remodelled FAME II scheme, the government said on Tuesday.

Discovered prices of the Grand Challenge tender are between 15 per cent and 48 per cent lower than the price discovered by the cities and even at par or close to the operational cost of diesel vehicles, according to official releases.

This tender establishes a benchmark for public transit going forward in terms of a business model. It allows state agencies to purchase mobility as a service – where operators are paid a fixed price denominated as rupees per kilometre over a period of time, the Heavy Industry Ministry said in a release.

The ministry said that the tender contains the largest ever aggregation of electric buses – 5,450 buses across five major cities which have indicated their demand for electric buses. The participating cities are Kolkata, Delhi, Bangalore, Hyderabad and Surat.

Price bids of the tender process under the remodelled FAME II scheme for electric buses were opened by the ministry on Tuesday.

“The rates seen in this tender are the lowest ever – with Tata Motors coming across as the least cost bidder across all five categories of electric buses contained in the tender,” the ministry said in a statement.

The Power Ministry in a release said that prices discovered are the lowest ever and more importantly, at par with or very close to the operational cost of diesel buses. The lowest price discovered for a 12-meter bus is Rs 43.49/km, and a 9-meter bus is Rs 39.21/km. This includes the cost of electricity for charging of the buses, it stated.

The prices realized set a benchmark for public transport, the price point which may encourage even small cities to adopt electric vehicles. The Heavy Ministry stated that at these rates, electric buses become extremely affordable across the country.

This public-private model has emerged as a way for cities to introduce or scale electric bus services. With a burgeoning demand for mobility, this model holds the potential to serve as a solution to cover the investment needs of the bus sector and ramp up bus services, it said.

In an industry first, the Grand Challenge tender homogenizes demand for electric buses – making this a step closer to standardization of modern public mobility.

The value of the tender is over Rs 5,000 crores. The buses are expected to operate around 4.71 billion kilometres over 12 years saving 1.88 billion litres of fossil fuel. This will result in 3.31 million tonnes of CO2e from tailpipe emissions, a major step towards mitigating climate change.

Buses will benefit from the central government subsidy offered under the remodelled FAME II scheme administered by the Ministry of Heavy Industries. With the very low discovered prices under the Grand Challenge, a savings of approximately Rs 361 crore of national subsidy can be realized, which in turn may be utilized for additional buses.

The contract term is 12 years, with assured kilometres of 10 lakh per bus, and a credible payment security system.

Special emphasis was paid to the requirement for domestic content, specifications for which are the highest to date.

At least 25,000 people will be employed through this tender, of which 10 per cent will be women. This does not include new employment created through new manufacturing facilities.

In June 2021, the FAME II scheme was remodelled and its delivery mechanism changed to better suit the needs of state transport undertakings, especially in their financial ability to afford electric buses.

The main objective of the Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME India Phase II) scheme is to encourage faster adoption of electric and hybrid vehicles by way of offering upfront incentives for the purchase of electric vehicles and also by establishing necessary charging infrastructure for EVs.