New Delhi: Only 12 States and Union Territories – Gujarat, Karnataka, Rajasthan, Punjab, Telangana, Andhra Pradesh, Madhya Pradesh, Meghalaya, Maharashtra, Uttarakhand, Odisha and Jammu and Kashmir – out of 36 have imposed payment security mandate with the Union Government of India’s E-PM Reserve Bank (RBI) Sewa Payment Security Mechanism (PSM), according to two people familiar with the development.
The PM E-bus Sewa PSM program plans to build confidence in e-bus manufacturers and operators to put more than 38,000 zero-emission buses on the roads.
“Maharashtra submitted its DDM in August, followed by Odisha and Jammu and Kashmir in September. Now there are 12 states and UTs which have submitted DDM under PM E-bus Sewa PSM,” said an official familiar with the development.
DDM refers to a direct debit authorization that confirms the participation of the state or UT in the payment security mechanism.
On October 7, Mint reported that the government had received DDM from Maharashtra, enabling the tendering of e-buses in Mumbai and Pune under the PM E-Drive scheme.
The payment security mechanism was created by the government almost a year ago after several state transport agencies that procured e-buses were unable to pay their dues to manufacturers and operators.
This mechanism creates an advance similar to a bank guarantee that can be paid out to OEMs and operators in the event that the contractor fails to make timely payments.
In case of late payments, the government will use the fund created under the PSM scheme to compensate bus manufacturers and operators, which will later be compensated from the PTA and STA.
Interestingly, Delhi, which has purchased the most e-buses, has not yet imposed PSM.
E-bus tenders are most often awarded under the Gross Cost Contract (GCC) model. This model places Public Transport Agencies (PTAs) or State Transport Agencies (STAs) as the contracting authority and must pay per kilometer costs to bus manufacturers and operators.
The Mint solicited comments from all 12 states that submitted a PSM collection permit on October 16, but received none.
Email queries sent to all other States and Union Territories seeking reasons why they did not impose direct debit authorization under the scheme on the said date also went unanswered.
Inquiries to the Union Ministry of Heavy Industries and the RBI also remained unanswered.
Electrification pressure
PM E-bus Sewa PSM is part of a coordinated government effort to promote e-bus adoption. In the Economic Survey for Fiscal Year 2025 (FY25), Chief Economic Adviser V. Anantha Nageswaran said electrification of public transport is key to reducing vehicular emissions and dependence on oil imports.
This scheme works in tandem with ₹10,900 crore PM E-Drive scheme to reduce the initial cost of procurement of 14,028 e-buses for the contracting authority, with allocation ₹4,391 million.
The PSM program, run by the Ministry of Heavy Industry, has an expenditure of approx ₹3,435 crore, which will be used to set up a fund to pay dues to bus manufacturers and operators in case of delays by PTA and STA.
Domain experts said faster adoption of e-buses in the country will lead to faster decarbonisation of Indian roads, provided intercity buses can run on chargers on highways and expressways.
The government is also increasing charger capacity under the PM E-Drive scheme, with plans to cover most of the cost of installing more than 72,000 chargers in public places, including highways.
The reason is the gradual increase in Indian e-buses. In the first half of FY26 (April-September), e-bus sales in the country grew by 37% over the same period last fiscal.
A study conducted in August by NITI Aayog in collaboration with think tank WRI ranked states based on overall progress in the EV sector, with Delhi, Maharashtra and Chandigarh emerging as frontrunners. The same three states also led the way in promoting electric vehicle (EV) adoption policies as per the 2024 Indian Electric Mobility Index (IEMI).
Key things
- Only 12 of the 36 states and UTs have completed the payment security mandate required for PM E-bus Sewa Payment Security Mechanism (PSM) of the Union government.
- PSM acts as a “bank guarantee” deposit to ensure that e-bus manufacturers and operators are paid on time, preventing delays by state transport agencies.
- The mechanism is critical to building industry confidence, which is necessary to achieve the government’s target of deploying more than 38,000 zero-emission buses.
- The PSM is part of a coordinated national effort to boost e-bus adoption and decarbonise public transport, which runs alongside the ₹10,900 crore PM E-Drive scheme, which subsidizes the cost of buses and the installation of chargers.
