MHI plans financing support for electric buses and trucks through credit guarantees and interest subvention, aiming to lower borrowing costs and accelerate EV adoption among private operators.
Key points
- What MHI Is Actually Working On
- Why Financing Has Been Such A Sticking Point
- The Cost Gap Standing Between Electric And Diesel
- Why Private Operators Are Central To This Push
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The Ministry of Heavy Industries (MHI) is developing a new financing support framework aimed at making it easier and cheaper for operators to buy electric buses and trucks. Dr Hanif Qureshi, IPS, Additional Secretary at MHI, has been leading much of the public conversation around this effort, laying out both the scale of the financing problem and the kind of support the government is now considering.
What MHI Is Actually Working On
Table of Contents
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1. What MHI Is Actually Working On |
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2. Why Financing Has Been Such A Sticking Point |
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3. The Cost Gap Standing Between Electric And Diesel |
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4. Why Private Operators Are Central To This Push |
According to Qureshi, the proposed scheme could include a credit guarantee mechanism, where the government absorbs part of a lender's loss if a borrower defaults, alongside interest subvention, meaning government support to lower the effective interest rate operators pay on their loans. The thinking here is straightforward: if development finance institutions and the government share some of the lending risk, banks and financial institutions become more willing to extend credit and more public and private capital can flow into the electric commercial vehicle space.
This isn't a one-off announcement either. MHI convened a high-level meeting back in May 2026, chaired by Union Minister for Heavy Industries and Steel H D Kumaraswamy, bringing together representatives from major banks including SBI, Punjab National Bank, Canara Bank, Central Bank of India, HDFC and SIDBI, along with bus and truck operators and transport associations. Between April and July, MHI ran further consultations with automobile companies and other stakeholders specifically to shape this financing scheme.
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Why Financing Has Been Such A Sticking Point
Qureshi has been candid about why this problem exists in the first place. Many bus and truck operators in India run genuinely small fleets, often fewer than five trucks or around ten buses and that scale makes lenders cautious, since the perceived risk on a small operator is much higher than on a large, established fleet business. On top of that, financial institutions have flagged concerns around evolving battery-performance data and the absence of a mature secondary market for used electric buses and trucks, both of which make it harder for lenders to confidently value the asset they'd be financing.
These aren't small, easily dismissed concerns either. They reflect a genuine gap in how comfortable Indian lenders currently are with electric commercial vehicles as an asset class, compared to the decades of data and resale history they have for diesel vehicles.
The Cost Gap Standing Between Electric And Diesel
MHI has actually quantified how close electric buses and trucks are to matching diesel on total cost of ownership and the gap turns out to be smaller than many might expect. The ministry's assessment found that a 5 percent reduction in total cost of ownership could bring electric trucks on par with diesel trucks, while a 6 percent cut could make certain electric buses cost-competitive as well. That's a genuinely narrow gap and it's exactly the kind of margin that well-designed financing support, credit guarantees and interest subvention, could realistically help close.
Beyond financing, Qureshi has also pointed to charging infrastructure as part of the broader picture. Under the PM E-DRIVE scheme, the government has allocated Rs 2,000 crore specifically for EV charging infrastructure out of the scheme's total Rs 10,900 crore budget, with 24 high-density freight corridors and 50 bus corridors identified for charger deployment. India currently has more than 67,000 EV chargers, including over 25,000 fast chargers, though the ministry estimates around 72,000 public chargers will be needed by 2030 to properly support growing electric commercial vehicle adoption.
Why Private Operators Are Central To This Push
One of Qureshi's more striking points is about who actually operates India's buses. Public transport buses make up only around 7 percent of India's registered bus fleet, roughly 168,000 vehicles out of about 2.4 million total. The remaining 93 percent, close to 2.2 million buses, run in the private sector, covering intercity routes, employee transport, school buses and tourist services. Government electrification schemes have historically focused heavily on public transport operators, which means a huge share of India's bus fleet has effectively been left out of the electrification push so far.
Qureshi has argued that India can't hit its broader electrification targets without actively bringing private bus operators into the fold, pointing to examples like China and Kenya, which have used a mix of upfront subsidies, low-interest financing and Battery-as-a-Service models, where the battery is owned separately from the vehicle, to dramatically lower upfront costs for private operators. For India's own private bus and truck operators, a well-designed financing scheme addressing both credit risk and interest cost could be exactly what's needed to make the switch to electric genuinely affordable at scale.
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Frequently Asked Questions on Commercial Vehicles
Q1. What financing support is MHI planning for electric buses?
Ans. MHI is working on a scheme that could include a credit guarantee, where the government absorbs part of a lender's loss on default, along with interest subvention to lower borrowing costs for electric bus and truck operators.
Q2. Why is financing such a big barrier for electric buses right now?
Ans. Many bus and truck operators own very small fleets, sometimes fewer than five trucks or around ten buses, which makes lenders cautious due to higher perceived risk, along with concerns about battery performance data and a limited secondary market.
Q3. How much cost reduction would make electric buses competitive with diesel?
Ans. MHI has estimated that a 6% reduction in total cost of ownership could make certain electric buses cost-competitive with diesel buses, while a 5% cut could do the same for electric trucks.
Q4. Why does MHI want to bring private bus operators into electrification efforts?
Ans. Public transport buses make up only about 7% of India's registered bus fleet, with the remaining 93% operating in the private sector, so MHI believes broader electrification targets can't be met without engaging private operators too.