NEW DELHI: The Center is preparing a new funding scheme aimed at accelerating the roll-out of electric trucks and buses, targeting one of the biggest hurdles in India’s transition to green mobility – the lack of available credit for fleet owners.
The Ministry of Heavy Industries (MHI) and the Department of Financial Services (DFS) under the Treasury have begun discussions on a new framework to support commercial electric vehicle (EV) financing, according to two people aware of the development. The plan is based on NITI Aayog recommendations earlier this year and could include incentives for lenders and structured guidelines for providing loans to electric utility vehicle buyers.
“Talks have started between MHI and DFS to proceed with NITI Aayog’s recommendation,” said one of the two people cited above, requesting anonymity. No financial corpus has been finalized yet, the person added.
The proposed scheme seeks to make borrowing cheaper for buyers of electric trucks and buses by encouraging banks and non-banking finance companies (NBFCs) to lend at lower rates and to design products that shift costs from initial capital expenditure to operational costs, the second person said, requesting anonymity.
In an August report titled Unlocking the $200 billion opportunity: electric vehicles in India, a government think tank recommended creating a pooled fund of public and multilateral sources to provide low-interest loans, especially to small transport operators. The NITI Aayog has suggested that the scheme be rolled out within a year of its recommendation.
Email queries sent to MHI, DFS and NITI Aayog on November 3 remained unanswered.
Exchange financing
The push for the funding mechanism comes as India seeks to reduce its dependence on fuel imports and move to net zero emissions by 2070. While policy incentives such as FAME and PM E-Drive have boosted sales of electric two- and three-wheelers, large commercial vehicles remain the opposition.
Electric trucks and buses cost two to three times as much as their internal combustion engine (ICE) equivalents, a major deterrent for small fleet operators. The electric bus costs approx ₹1-1.25 crore or more while a diesel bus can cost ₹25-50 thousand, depending on the size. Heavy electric trucks with a gross weight of more than 12 tons are similarly priced ₹1-1.5 million compared to ₹25-50 lakh for their diesel counterparts.
“Lenders face higher risks in financing e-trucks and e-buses as their upfront costs are roughly 2.5 times higher than comparable diesel vehicles. The absence of a mature resale market and uncertainty about residual values further increase the perceived risk,” said Dhiraj Agrawal, business director at Mufin Green Finance, an EV financier.
Residual value, the estimated value of a vehicle at the end of its lease term, tends to be lower and more uncertain for EVs because their batteries degrade faster than ICE engines. This makes monitoring battery health critical for lenders evaluating asset quality and resale potential.
The NITI Aayog report also noted that truck and bus ownership in India is highly fragmented and small players are struggling to secure financing for high value EVs.
“Lenders use vehicle telematics, battery health monitoring and maintenance records to monitor asset performance and utilization. However, the lack of standardized frameworks for reporting battery degradation and predicting residual values in India complicates asset tracking,” said Agrawal.
Experts said the absence of reliable data on the performance of e-trucks and e-buses makes it difficult for financiers to assess risk, further limiting credit flow to the segment.
Despite political support, uptake is still slow. As of 2024, electric buses accounted for just 7% of total bus sales in India, compared to 50% in China and 14% in Europe. According to NITI Aayog, adoption of heavy electric trucks has reached only 0.07% compared to 3% in China and 2% in Europe.
If implemented, the new funding plan could see a shift from subsidy-based support to credit facilitation, aligning India’s EV policy with global best practices that emphasize risk-sharing and financial mitigation.
