Mint Explainer | Why India’s e-bus tender model is worrying manufacturers

While the numbers look promising, bus manufacturers have found that the gross cost contract (GCC) tender model poses concerns, as it is a capital-intensive and stringent approach. Mint unpacks the model and explains why it is a concern.

India’s massive e-bus tenders

The CESL tender, along with future tenders under the scheme will operate on the gross cost contract (GCC) model. State governments, which run state transport authorities, will procure and operate these buses from manufacturers over a period of ten years. They will pay for the operation of the buses on a per-kilometre basis, the price of which will be determined in the tendering process.

While these contracts between sellers (bus manufacturers) and procurers (state transport authorities) can be made under any model they mutually agree upon, the tenders under the PM E-Drive scheme must follow the GCC model, as that is what the scheme entails.

Mint reported on 22 October that the June tender was deferred due to it being too expensive and stringent for participants, as well as inadequate infrastructure within states to house that many e-buses. The tender was deferred a third time to 14 November due to the festive season.

PM E-Drive scheme for e-buses

The PM E-Drive scheme is integral to this story because it has a massive allocation to reduce the cost of procuring and operating electric buses in the country. Of its ₹10,900 crore outlay, the government has allocated about 40% – ₹4,391 crore – towards incentivising the rollout of 14,028 e-buses in nine cities. Five cities are covered in the first tender, with Mumbai and Pune to follow suit in the second phase.

That means the central government will bear some of the cost of procuring and operating e-buses for state transport authorities. With each electric bus costing upwards of ₹1 crore and the central government covering 20-35% of this figure, operating electric buses in these nine metropolises seems that much more viable for state transport authorities.

The Centre has also created additional guardrails to not leave bus makers hanging. Earlier, state governments frequently defaulted on payments to bus makers. Under the PM E-bus Sewa Payment Security Mechanism (PSM), the central government has created a fund of about ₹3,400 crore to be used in cases where states are unable to pay bus manufacturers.

However, to access this fund, states have to set up a direct debit mandate (DDM) with the Reserve Bank of India, which will allow the central government’s fund to be refilled from state government treasuries.

Enter GCC model

This is where the GCC model of contracts comes in. The GCC model is an operational expenses model, where the pricing of the tender will be based on operational costs, i.e., the cost of running an e-bus for every kilometre. In this model, the bus is owned, operated, and maintained by service providers (bus manufacturers and operators, or consortia), according to CESL.

The state transport authority pays a pre-decided per-kilometre fee discovered through a competitive bidding process to the service provider.

In contrast, under a dry lease contract, the bus is owned and maintained by the service providers, ie the manufacturers or consortia, for a specific rate and contract period, but the responsibility of operation is with state transport authorities.

The qualm for bus makers under the GCC model is that it is an asset-heavy model of entering into a contract, and it makes their balance sheets bulky. That is because the ownership of the asset, the e-bus in this case, remains with the manufacturer, and they get paid for every kilometer the bus runs.

A Tata Motors spokesperson told Mint that the company had skipped previous tenders due to the asset-heavy model. “We have consistently advocated for the inclusion of asset-light model (ALM) and payment security mechanism (PSM) as fundamentals for a financially viable and bankable business model,” the company’s spokesperson had said, Mint reported on 15 October.

“We chose to follow a prudent business strategy and refrained from participating in certain tenders in the past due to the absence of these essential safeguards.”

The company plans to re-enter select tenders through a consortium model, even as full clarity on asset-light mechanisms is awaited, the spokesperson added.

Tata Motors, through its commercial vehicles arm, has supplied over 1,400 e-buses in 2024, and over 200 e-buses in 2025, according to data from the central government’s Vahan registry of vehicles.

The economics of e-bus operations

E-bus adoption in India is at a pivotal juncture, with the country aiming to become a net-zero carbon emitter by 2070. Since these buses operate for the entire day, they reduce vehicular emissions more significantly than individually owned vehicles, which operate for a select time period every day.

The Centre’s new safeguards—subsidies, payment security, and demand aggregation—aim to address these gaps. However, until tendering models become more sustainable, India’s e-bus ambitions may remain in low gear.

Anurag Singh, advisor at management consultancy Primus Partners, had earlier told Mint that bus manufacturing and bus operation are completely different businesses, requiring different skill sets and cash flows. A more “flexible” approach would help soothe bus makers’ anxiety, he had said.