Govt Likely To Slash Electric Bus Subsidy To Cater To More Cities

SUMMARY

Cities such as Hyderabad, Surat, Bengaluru and Pune have together raised a subsidy demand for more than 15,000 units

An official confirmed that the government may possibly lower subsidies offered per unit, resulting in the ability to cater to more cities

The MHI recently approved subsidies for 9,800 e-buses in Bengaluru and Hyderabad under the PM E-DRIVE scheme, in February

In a move to cater to more cities, the government is reportedly considering reducing the per unit subsidy for electric buses under the PM E-DRIVE scheme without raising the budgetary allocation.

Cities such as Hyderabad, Surat, Bengaluru and Pune have together raised a subsidy demand for more than 15,000 units, an ET report said, citing officials familiar with the matter.

“The newly formed Delhi government is expected to raise a significant demand for e-buses. Orders from Ahmedabad, Mumbai, Chennai and Kolkata are awaited as well,” an official was quoted as saying in the report.

The report further said that currently the Centre offers a subsidy of INR 20-35 Lakh per electric bus, depending on the carrying capacity and specification of the vehicle.

In September last year, the government introduced the PM E-DRIVE (PM Electric Drive Revolution in Innovative Vehicle Enhancement) scheme, replacing the erstwhile Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) scheme.

The scheme was aimed at promoting electric vehicles (EVs) in the country by offering subsidies to manufacturers, shoring up charging infrastructure and spurring local EV manufacturing capabilities, and has an outlay of INR 10,900 Cr for two years.

Under the scheme, the government aims to give subsidies and demand incentives worth INR 3,679 Cr for electric two-wheelers (E2Ws), three-wheelers (E3Ws), ambulances, trucks and other emerging EVs.

Besides, it also aims to support 24.79 Lakh E2Ws, 3.16 Lakh E3Ws and 14,028 ebuses.

A Mint report in February said that the ministry of heavy industries (MHI) has approved subsidies for 9,800 e-buses in Bengaluru and Hyderabad under the PM E-DRIVE scheme.

The report further said that the Centre approved Bengaluru’s demand for 7,000 e-buses and Hyderabad’s demand for 2,800 such buses.

What makes EVs more expensive than vehicles with internal combustion engines (ICE) is the high battery cost component. Moreover, India faces resource limitations around the production of critical minerals such as cobalt, nickel, and lithium — crucial for the production of EV batteries.

The Economic Survey 2024-25 highlighted that India sources 75% of lithium-ion batteries from China.

Finance Minister Nirmala Sitharaman in the 2025 Budget proposed a duty exemption for cobalt power, lithium-ion battery scrap, lead, zinc and 12 critical minerals. This is expected to give a boost to domestic manufacturing of EV batteries.