The United States government has put forward a proposal to support India’s ambitious plan to transition to electric buses. The proposal, which is currently under negotiation, involves the US extending a $150 million payment guarantee for companies that will supply electric buses to India’s state transport undertakings (STUs). This financial backing is seen as a key move to bolster India’s National Electric Bus Programme (NEBP), which aims to float tenders for approximately 50,000 electric buses over the next five years.
The initiative is part of a broader strategy to foster e-mobility adoption in India and shift away from diesel-powered transportation, aligning with the country’s net zero ambitions. To mitigate past issues faced by suppliers, such as the financial challenges of STUs and the absence of payment guarantees, an escrow account will be established to serve as a payment security mechanism should STUs default on payments.
The discussions are taking place against the backdrop of Commerce and Industry Minister Piyush Goyal’s visit to the United States, where he is also engaging with Tesla (NASDAQ:) CEO Elon Musk regarding the establishment of Tesla’s first factory in India. The ongoing talks and the proposed fund are expected to gain further momentum with US President Joe Biden’s planned visit to New Delhi in January, an event that is anticipated to enhance bilateral relations and promote collaborative efforts on clean energy and transportation.
The need for such financial instruments became evident following obstacles encountered in January 2023 when Convergence Energy Services Ltd (CESL) tendered for 4,675 electric buses but faced hurdles due to the lack of payment guarantees. By introducing a payment security mechanism, both countries aim to address these financial barriers and ensure manufacturers are safeguarded against potential defaults by STUs.
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