New Delhi: The 2,800 electric buses allocated to Delhi under the PM E-Drive scheme meant to electrify public transport hangs in balance, as the city government has yet to meet a crucial condition under the incentive plan.
Delhi has not fulfilled its payment security mechanism requirement 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's will not be eligible for the country’s largest e-bus tender for 10,900 buses under the ₹10,900-crore PM E-Drive scheme.
Under the PM E-Drive scheme, the direct debit mandate allows the RBI to automatically deduct money from a state or Union territory's account and ensure timely payments to the bus suppliers.
Now, the ministry of heavy industries, the RBI, the Union home ministry, and the government of Delhi are rushing to clear this hurdle by exploring the possibility of using Delhi’s own consolidated fund, created under the 1993 Delhi Act, two officials aware of the development said.
“Delhi has now begun meetings with the home ministry and the RBI to resolve this issue,” said the first of the two officials cited above, both of whom spoke on the condition of anonymity.
Under Indian law, the Union home ministry is responsible for handling finances of Union territories that don't have their own legislatures. But Delhi is a Union territory with a legislature, and wants to use its own consolidated fund for meeting the key conditions for the bus tender, the second official said. Yet, rules are framed in such a way that they still give the home ministry a say in how the city's finances would be used.
Default prevention assurance
The payment security mechanism was created to assure bus manufacturers that state transport agencies which procure e-buses will not default on payments. The central government created a fund of about ₹3,400 crore to pay dues on which state governments have defaulted, and a DDM allows the Centre 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.
In the first case, states and Union territories have to create a DDM with the RBI, so that the central government can cover for them if need be, and money from the state’s funds can be used to reimburse the Centre.
The second case is more specific, with the PM E-Drive scheme aiming to incentivise 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 the supply of 10,900 e-buses in five cities – Delhi, Ahmedabad, Surat, Hyderabad, and Bengaluru.
To be eligible for this, the state or Union territory governments have to fulfil 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 an open, competitive bidding process in line with the prescribed tender procedures. As communicated earlier, under the first phase of the PM E-Drive scheme, the allocation of 10,900 e-buses across five cities has been undertaken by the ministry of heavy industries. The bidding evaluation is currently underway and has received a strong response, with 16 bidders participating. Once the tender process concludes and rates are discovered, these will be shared with the participating cities. Thereafter, the respective cities will issue Letters of Award and enter into concession agreements directly with the selected bidders, it added.
Queries emailed to the Delhi government, the Union heavy industries ministry, the Union home ministry, and the RBI on 18 November remained unanswered.
The clean 13
As many 13 states and UTs have submitted their DDMs under the payment security mechanism scheme – Gujarat, Karnataka, Rajasthan, Punjab, Telangana, Andhra Pradesh, Madhya Pradesh, Meghalaya, Maharashtra, Uttarakhand, Odisha, Jammu & Kashmir and Puducherry, according to the ministry of heavy industries’ statement on 10 November.
Puducherry, another Union territory with its own legislature, completed its submission of the DDM in October, the same statement said. “Delhi’s solution will be akin to Puducherry, because it is another UT with a legislature,” said the second official cited above.
Experts said that a payment security mechanism is key to ensuring the roll-out of e-buses on Indian roads, as state governments have defaulted on payments in the past. Also, electric buses run throughout the day, compared to other electric vehicle segments, which run only for a limited time, thereby reducing more carbon emissions than, say, two-wheelers or three-wheelers.
“The PSM is integral for paying bus makers and operators on time, as these are private sector companies,” said Amit Bhatt, India director of the International Council on Clean Transportation, a research organization. “Scaling public transport is vital for sustainable urbanization, and ensuring timely payments is key to maintaining industry confidence and service quality. Moreover, if Delhi manages to secure its PSM, it may have a ripple effect and help other Union territories also secure their PSMs,” he said.
Crucial requirement
Resolving Delhi’s DDM issue is crucial, as the city has limited time before it must start signing contracts with bus makers for the 10,900-e-bus tender, of which 2,800 are earmarked for Delhi.
Mint reported on 15 November that bus makers Tata Motors, JBM Auto, PMI Electro, Pinnacle Mobility, Volvo Eicher, and bus operators Greencell Mobility and Evey Trans had submitted bids in the tender, with the price discovery likely to take about a month’s time.
The second official said that states are likely to start signing agreements with bus makers under this tender in January 2026, putting a countdown clock over Delhi to secure the payment security mechanism.
The PM E-bus Sewa Payment Security Mechanism scheme and the PM E-Drive scheme both received the Union cabinet’s assent in September last year. The PM E-Drive scheme for e-buses ends in FY28, and the PM E-bus Sewa Payment Security Mechanism will work till FY29. The payment security mechanism will cover the operation of e-buses for 12 years from signing of contracts. Cumulatively, both these schemes aim to contribute in putting more than 40,000 e-buses on Indian roads.
A March 2025 report by CareEdge Ratings stated that India’s annual e-bus sales could rise to about 17,000 units by FY27, backed by subsidies, incentives, and the payment security mechanism. About 3,500 e-bus units are sold annually as of now.