Can our public bus services promise a revolution in mobility?

Today, at one-fifth the cost of a flight, India’s road transport dominates intercity travel; Between our cities 30-50 million people travel daily.

It follows, that India’s annual three-fold increase in road construction promises a revolution in mobility, which is in the Indian skies.

Can our public bus services emulate the success of our airlines?

In the debate around decarbonization and mass mobility, electric buses have struggled to gain attention. Nevertheless, their unit cost arguably makes such mass mobility more relevant electric vehicle transport for India.

Which makes our private equity fund’s decision to invest in an electric bus partnership with the state network – the people’s largest public sector proponent after the railways – an outlier. Yet this is typical of a fund that has quietly launched the largest emerging market country climate fund, with anchor investments by the Indian and UK governments. It aims to invest in climate businesses that provide commercial returns. Electric buses and mass mobility fit that bill.

Transport is the second largest source of emissions in India, which hosts 14 of the world’s 20 most polluted cities. About 20 million 2-wheelers and 2.5 million passenger and cargo vehicles connect India’s closed roads every year.

Consider our own journey with 0 to 900 public service buses in 20 cities across three states. We have done this in partnership with State Transport Undertakings (STUs), which has resulted in significantly cutting operating costs and air pollution and bringing (some) airline comfort to the ground.

Last week, Transport Minister Nitin Gadkari said at a mint event that the government was committed to buying 50,000 electric buses because “electric mobility is the future.” The race to the future has really begun, with STU fleets transitioning from ICE to EV incentive models that reward private operators with long-term contracts to own, deploy and maintain electric buses on STU-provided routes . More than 4,000 electric bus contracts have been awarded, a huge potential contribution to achieving India’s net zero emissions target by 2070.

The pace of this massive change will accelerate if technology can cut costs and expand battery storage capacity. The government is cultivating indigenous lithium batteries, which should reduce the cost. Former CEO of NITI Aayog Amitabh Kant has remarked that “the key lies in bringing parallels between EVs and ICEs.” This is indicative of a drop in costs due to technology advancements; This is especially good for PE funds that shy away from backing primary innovation but are too quick for any opportunity to return to scale.

How will this happen? For us, it has been through Public Private Partnership, a structure with a suitable record in India. With PPP, STUs are able to augment the fleet with green technologies. Another option is to partner with private operators to improve the revenue model for STUs, while keeping tariffs affordable by embedding technology to optimize routes and fleet usage (so, buses don’t stand idle). . Done well, then, electric buses could wean consumers away from ride-hailing or private cars, both emissions sinners.

Optimism about electric buses needs to be seen within the urgent public debate on mass mobility and climate change and any structural changes to ensure that mobility is energy efficient, safe and affordable. When India progresses well, it grows well, it is a suitable formula.

For now, public bus operators are ‘book-ended’ between airlines, which do not reach most places or are too expensive, and railways, which are inexpensive but cannot fully meet demand.

Nor are public buses a haven, as they lack boarding ports, are unsanitary, and operators are incredibly unreliable. India’s 62 STUs operate a fleet of over 150,000 buses, but carry only 8% of the estimated traffic, while 92% of passengers are served by over 15,000 private operators, the largest of a few hundred buses. It is a running fleet. Covid and high diesel prices have been disastrous for most operators. Weak financial position, aging fleet and high operating costs add to the inflationary pressure which will result in no relief to the passenger.

This is the inflection point for the entry of electric buses.

Electric buses now run longer distances and when combined with fast-charging batteries can cover more than 600 km each day. Their zero tailpipe emissions make a significant contribution to India’s net zero goals and will further reduce emissions as the share of renewable energy in the electricity grid increases.

India began its current phase of building highways without factoring in the full measure of climate change and the subsequent emergence of EVs has given wings to 3,900 km of new roads added each year. Organized capital has the opportunity to enable large-scale electric mobility to reduce emissions from a dirty sector, while a chain of infrastructure such as boarding ports, maintenance depots and charging centers could give road transport some sunrise features .

The parallel with airlines is premature but as PE steps in, it certainly feels like we’re on the runway.

Dhanpal Jhaveri is the Vice Chairman of Everstone Capital and the CEO of Eversource Capital.

first article