Niti Aayog draws Rs 11,000-crore plan for states for buying buses

New Delhi: Niti Aayog, the government’s think-tank, is firming up a plan to help state governments and local bodies all over the country to buy buses worth Rs 11,000 crore in a bid to improve public transport and revive demand for commercial vehicles. “Niti Aayog has prepared a plan for introduction of about 25,000 buses for urban users. These buses would be run on diesel,” a government official told ET.

These buses will be largely internal combustion engine-based ones, helping the industry shed its inventory, separate from the plan already in place to encourage a switchover to electric buses. Asimilar plan was implemented by the previous United Progressive Alliance government to help states purchase buses under the Jawahar Lal Nehru National Urban Renewable Mission after the 2008 financial crisis to boost the economy.

The country’s automobile sector has been hit by a slowdown, with wholesale dispatches of passenger vehicles sales declining in September for the 11th straight month. Sales grew 1.5% in the festive season in October, but experts said this may just be a blip. An index of the country’s core industry sectors contracted in September by the most in 14 years. Experts fear Q2 GDP growth numbers, expected on November 29, may be slower than the 25-quarter low of 5% in the first quarter.

The move to purchase buses is also expected to boost the public transport system and urban demand for commercial vehicles. The cost of the scheme is estimated at about .`10,648 crore, with the Central government’s share at Rs 5,241crore. According to the draft guidelines formulated by Niti Aayog in October, the exercise will be taken up on an operating expenditure model, without any upfront cost to the state and Central governments.

Niti proposes to ‘encourage’ the private sector to procure buses and ply them on existing and new routes in a bid to boost last-mile connectivity and bridge a shortfall in public transportation. However, experts said it will be a challenge to attract private operators to invest capital.

“The Central and state governments shall jointly contribute towards operating expenses incurred by the private operators through an opex model, where the operators will be paid on a per-km basis,” according to the guidelines, a copy of which ET reviewed.

Routes will be awarded through competitive bidding and a draft model concession agreement – valid for six years – will be available for states to prepare specific agreements.

“Private players will come forward once they have the assurance of timely payments,” said a government official. “This can be done through an escrow account. So far, private companies have had a bad experience with state transport undertakings, the reason why this model has not taken off.”

States will be required to identify demand-supply gaps on existing bus routes and make changes to ensure that private players availing of this scheme are allowed to ply on these routes. “States shall endeavour to ensure that at least 50% of the buses under this scheme will ply on new identified last-mile routes on which state transport utility buses do not currently operate,” said the guidelines.