New Delhi: The 2,800 electric buses allotted to Delhi under the PM E-Drive scheme, which aimed to electrify public transport, are hanging in the balance as the city government is yet to fulfill a crucial condition under the incentive plan.
Delhi has failed to meet its demand for a payment security mechanism under the scheme, which asks states and Union territories to create a direct debit mandate (DDM) with the Reserve Bank of India (RBI). Without fulfilling this condition, the city will not be able to participate in the largest e-bus tender in the country for 10,900 buses under ₹10,900 crore PM E-Drive Scheme.
Under the PM E-Drive scheme, the RBI’s collection mandate allows money to be automatically deducted from the account of a state or Union territory and ensure timely payments to bus suppliers.
Now the Ministry of Heavy Industries, the RBI, the Union Home Ministry and the Delhi government are rushing to overcome this hurdle by exploring the possibility of using Delhi’s own consolidated fund, created under the Delhi Act of 1993, said two officials aware of the development.
Key things
- Allotment of 2,800 electric buses in New Delhi is in jeopardy as it has not met the requirement of the basic scheme.
- Delhi has failed to establish Direct Debit Approval (DDM) with RBI, which is mandatory for the PM E-Drive scheme.
- DDM is essential to the Payment Security Mechanism (PSM), which guarantees timely payments to private bus manufacturers and the confidence of the construction industry.
- The central issue is the conflict over Delhi’s authority to use its consolidated fund for the mandate, complicated by the Union Home Ministry’s oversight.
- Several Ministries (Heavy Industries, Home) and the RBI are in urgent discussions to find a solution that is likely to mirror that used by Puducherry.
- DDM must be secured soon as states are expected to start signing e-bus contracts as early as January 2026.
“Delhi has now started discussions with the Home Ministry and the RBI to resolve the issue,” said the first of the two officials cited above, both of whom spoke on condition of anonymity.
Under Indian law, the Union Ministry of Home Affairs is responsible for managing the finances of Union Territories that do not have their own legislatures. But Delhi is a Union territory with a legislature and wants to use its own consolidated fund to meet key conditions for tendering buses, a second official said. However, the rules are designed to still give the Home Office the ability to decide how the city’s finances will be used.
Standard prevention provision
The payment security mechanism was created to ensure bus manufacturers that state transport agencies that procure e-buses will not default on payments. The central government has created a fund of approx ₹3,400 crore to pay dues defaulted by state governments and the DDM allows the Center to collect these dues from states.
This Payment Security Mechanism (PSM) and its DDM serve a dual purpose – one under the PM E-bus Sewa Payment Security Mechanism scheme and the other under the PM E-Drive scheme.
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In the first case, States and Union Territories have to make DDMs with RBI so that the Central Government can cover them if required and money from State funds can be used to reimburse the Centre.
The second case is more specific, with the PM E-Drive scheme, which aims to incentivize the procurement of 14,028 e-buses in nine cities – Delhi, Ahmedabad, Surat, Pune, Mumbai, Hyderabad, Bengaluru, Chennai and Kolkata.
The government through its demand aggregation and tendering agency Convergence Energy Services Ltd (CESL) has started evaluating bids for supply of 10,900 e-buses in five cities – Delhi, Ahmedabad, Surat, Hyderabad and Bengaluru.
To be eligible for this, State or Union Territory Governments must meet the Payment Security Mechanism and its DDM condition.
In response to Mint’s queries, CESL said its role is limited to aggregating demand and facilitating open, competitive bidding in accordance with prescribed tender procedures. As informed earlier, under the first phase of the PM E-Drive scheme, the Ministry of Heavy Industries has allocated 10,900 e-buses in five cities. The tenders are currently being evaluated and received a strong response, with 16 bidders participating. Once the bidding process is complete and the rates determined, they will be shared with the participating cities. After that, the respective cities will issue tender documents and conclude concession contracts directly with the selected applicants, he added.
Queries emailed to the Delhi government, the Union Ministry of Heavy Industries, the Union Home Ministry and the RBI on November 18 remained unanswered.
Pure 13
According to a statement issued by the Ministry of Heavy Industries in November, 13 states and UTs – Gujarat, Karnataka, Rajasthan, Punjab, Telangana, Andhra Pradesh, Madhya Pradesh, Meghalaya, Maharashtra, Uttarakhand, Odisha, Jammu & Kashmir and Puducherry – have submitted their DDMs under the Payment Security Mechanism Scheme.
Puducherry, another Union territory with its own legislature, completed submission of the DDM in October, the same statement said. “The solution in Delhi will be similar to Puducherry as it is another UT with legislation,” said the second official cited above.
Read also | Government plans 3000 electric buses for Mumbai, Pune under PM E-Drive
Experts said the payment security mechanism is key to ensuring the introduction of e-buses on Indian roads as state governments have defaulted on payments in the past. Electric buses also run all day, compared to other EV segments that only run for a limited time, reducing more carbon emissions than, for example, two-wheelers or three-wheelers.
“PSM is integral to timely payment of bus manufacturers and operators as they are private sector companies,” said Amit Bhatt, India director of research organization International Council on Clean Transportation. “Scaling public transport is vital for sustainable urbanization and ensuring timely payments is key to maintaining industry confidence and service quality. Moreover, if Delhi succeeds in securing its PSM, it can have a knock-on effect and help other Union Territories also secure their PSM,” he said.
Essential requirement
Solving Delhi’s DDM issue is crucial as the city has limited time before it has to start signing contracts with bus manufacturers for the tender for 10,900 e-buses, of which 2,800 are earmarked for Delhi.
Mint reported on November 15 that bus manufacturers Tata Motors, JBM Auto, PMI Electro, Pinnacle Mobility, Volvo Eicher and bus operators Greencell Mobility and Evey Trans have submitted bids in the tender, with the price likely to take about a month to ascertain.
A second official said states are likely to start signing agreements with bus manufacturers under this tender in January 2026, starting a countdown for Delhi to ensure a payment security mechanism.
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The PM E-bus Sewa Payment Security Mechanism scheme and the PM E-Drive scheme received the approval of the Union Cabinet in September last year. PM E-Drive scheme for e-buses ends in FY28 and PM E-bus Sewa Payment Security Mechanism will operate till FY29. The payment security mechanism will cover the operation of e-buses for 12 years from the signing of the contracts. Collectively, both these programs are expected to contribute to the introduction of more than 40,000 e-buses on Indian roads.
A March 2025 CareEdge Ratings report said annual Indian e-bus sales could increase to around 17,000 units by FY27, supported by subsidies, incentives and a payment security mechanism. About 3,500 e-bus units are now sold annually.
