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By Piyush P. Yadav

India sold 573 electric trucks and 4,615 electric buses in 2025, together well under 0.3 per cent of the 2.34 million EVs registered that year. The Ministry of Heavy Industries thinks the missing ingredient is not subsidy but credit, and on 1 September 2026 its Additional Secretary Hanif Qureshi told the India Clean Transportation Summit in New Delhi that a new scheme could support up to 50,000 electric buses and 50,000 electric trucks over five years through interest subsidies and a partial credit guarantee rather than the per-vehicle cash incentives of PM E-DRIVE. Reports put the budget at about Rs 9,852 crore and the guarantee at up to 80 per cent of the outstanding loan if a fleet owner defaults. This piece sets out what has been said, why lenders will not touch a five-truck fleet today, how the proposal differs from every earlier scheme, and what it would mean for the price of moving a tonne of freight.

What was proposed

Element Detail Source and status
Vehicles supported Up to 50,000 e-buses and 50,000 e-trucks over five years Qureshi, 1 September 2026; “we expect that probably up to”
Instrument Interest subsidy on vehicle loans plus partial credit guarantee; interest subvention also mooted for depot charging Qureshi, 1 September 2026
Guarantee cover Reportedly up to 80 per cent of outstanding loan on default Industry reports, not yet official
Budget About Rs 9,852 crore Reported; not in a Cabinet note yet
Target borrower Small fleets, cited as five trucks or ten buses, and state transport undertakings Qureshi; May 2026 stakeholder consultation
Status Under consideration at MHI; no Cabinet approval or notification As of 12 September 2026

The groundwork was laid at a consultation on 20 May 2026 chaired by Heavy Industries Minister H.D. Kumaraswamy with Secretary Kamran Rizvi and Qureshi, where fleet operators, aggregators, leasing companies and banks identified five barriers: financing for small operators and state transport undertakings, charging coverage, fleet-management complexity, operating economics, and confidence in long-term policy. The September proposal addresses the first directly and the second through the charging subvention.

Why credit, not cash, is the gap

Every earlier scheme paid money per vehicle. FAME-II and PM E-DRIVE together have committed support for more than 31,000 electric buses, over 7,000 under FAME, 14,028 under PM E-DRIVE and 10,000 under PM e-Bus Sewa, and for 5,643 electric trucks under PM E-DRIVE at up to Rs 9.6 lakh per truck. Yet only 573 heavy trucks were sold in 2025, and even at 155 per cent year-on-year growth the segment is a rounding error. The reason is that an electric truck costs two to three times its diesel equivalent up front, and the buyer is typically an owner-operator or a small transporter whose only collateral is the truck itself.

Banks and NBFCs price that risk out of reach. A diesel truck has a liquid secondary market and a resale value the lender can model; an electric truck has neither, its battery’s residual value is unknown, and its resale depends on a charging network that may not exist where the repossessed vehicle ends up. The result is loan-to-value ratios of 60 to 70 per cent against 85 to 90 per cent for diesel, tenures of three to four years instead of five to seven, and interest rates several points higher. For a Rs 1.2 crore electric tractor-trailer that combination pushes the monthly instalment above what the diesel-versus-electric fuel saving can cover, even where the per-kilometre economics favour electric. We set out those unit economics for buses in our explainer on how electric bus contracts and per-km rates work, and the same logic applies to trucks without the state as a counterparty.

How a guarantee changes the arithmetic

A partial credit guarantee shifts a defined share of the default loss from the lender to a government-backed fund. If the cover is 80 per cent, the lender’s exposure on a Rs 1 crore loan falls from Rs 1 crore to Rs 20 lakh plus whatever it recovers from the vehicle. That lets it lend at a higher loan-to-value ratio, over a longer tenure and at a lower rate, because the capital it must hold against the loan falls. An interest subsidy on top, say 3 percentage points, then reduces the instalment directly.

Loan scenario for a Rs 1.2 crore electric truck Today With 80 per cent guarantee and 3-point interest subsidy
Loan-to-value 65 per cent (Rs 78 lakh) 85 per cent (Rs 1.02 crore)
Owner’s equity Rs 42 lakh Rs 18 lakh
Tenure 4 years 6 years
Interest rate About 13 per cent About 9 per cent after subsidy
Monthly instalment About Rs 2.09 lakh About Rs 1.84 lakh
Equity plus first-year instalments About Rs 67 lakh About Rs 40 lakh

The figures are illustrative, using standard amortisation, but the direction is the point: the owner puts up less than half the cash in year one for a larger loan on a longer tenure, and the instalment falls despite the bigger principal. For a truck running 8,000 km a month, the fuel saving of an electric over a diesel at about Rs 12 per km versus Rs 28 per km is roughly Rs 1.3 lakh a month, which covers most of the instalment. Under today’s terms it covers about 60 per cent. That is the difference between a business case and no business case.

What it means for buses and STUs

Buses are further along. Most of India’s 2,944 electric bus registrations in the first half of 2026, up 40 per cent on the same period of 2025, were bought by operators under gross-cost contracts in which the state pays per kilometre and the Rs 3,435 crore payment security mechanism under PM e-Bus Sewa backstops the state’s payments. The new scheme’s credit guarantee would extend that comfort to operators bidding outside PM e-Bus Sewa, and to state transport undertakings that want to own rather than lease. The list prices, incentives and per-km alternatives are in our guide to what an electric bus costs in India. With Switch Mobility, JBM and PMI holding 70 per cent of registrations and Olectra leading August, the manufacturing base exists; what limits the 50,000-bus ambition is the pace at which cities can tender depots and charging.

How it fits with what already exists

Three other pieces of policy bear on the same vehicles. PM E-DRIVE’s demand incentive for trucks and buses remains in force until March 2028, and from 1 September 2026 a stricter localisation rule requires e-bus and e-truck makers to carry out traction-motor assembly steps, from magnet fitment to rotor and stator assembly, in India to qualify. NITI Aayog’s PACT platform and the ZET marketplace, launched at the e-FAST summit and covered in our report on NITI Aayog’s PACT and ZET marketplace, aim to aggregate freight demand and match it to electric truck supply on defined corridors. And the vehicles themselves are ready: Tata’s Ultra E.12 and Ace EV, Switch’s IeV4, Eicher’s Pro X, Ashok Leyland’s Boss 1219 EV, Montra’s Rhino and Olectra’s tippers span every weight class, as we mapped in our guide to every electric truck on sale in India. The credit scheme is meant to be the piece that turns the demand platforms and the product catalogue into orders.

What is still missing

  • A Cabinet note. Qureshi’s remarks describe a scheme under design. The Rs 9,852 crore figure and the 80 per cent cover are reported, not notified, and the last two schemes took six to nine months from first announcement to notification.
  • Who runs the guarantee. Options include a dedicated trust like the CGTMSE for small business loans, or an existing development finance institution. The choice decides how quickly banks trust it.
  • Battery residual value. No guarantee fixes the fact that lenders cannot price a used electric truck. A battery-health standard for used EVs, which MoRTH has acknowledged India lacks, would help more than any subsidy.
  • Depot power. A ten-truck depot needs about 1 MW of charging; the interest subvention for charging is welcome but the DISCOM connection timelines are the binding constraint in most industrial areas.
  • Electricity tariffs. Commercial charging tariffs above Rs 10 per unit in several states erode the per-km advantage that the whole scheme depends on.

Three-wheelers show what happens when finance works: electric autos crossed 55 per cent of L5 sales in August 2026 because a Rs 3 to 4 lakh vehicle with a Rs 50,000 incentive and a five-year loan from a dozen NBFCs pays for itself in fuel within two years. The heavy-duty scheme is an attempt to build the same lending market one weight class at a time. If it is notified by early 2027 and the guarantee is credible, 10,000 trucks a year by 2029 is plausible; 50,000 buses depends on cities more than on Delhi.

Sources & Further Reading

FAQ

What is the new scheme for electric trucks and buses?

A proposal under consideration at the Ministry of Heavy Industries to support up to 50,000 electric buses and 50,000 electric trucks over five years through interest subsidies and a partial credit guarantee, reportedly covering up to 80 per cent of a defaulted loan, with a reported budget of about Rs 9,852 crore. It has not been approved by Cabinet.

How is it different from PM E-DRIVE?

PM E-DRIVE pays a cash incentive per vehicle. The new scheme would instead lower the cost and raise the availability of loans, which is the barrier small fleet owners actually face because lenders will not finance electric trucks on diesel-like terms.

How many electric trucks and buses does India sell?

In 2025 India sold 573 heavy electric trucks and 4,615 electric buses. Electric bus registrations reached 2,944 in the first half of 2026, up 40 per cent, and 908 in August 2026. Electric goods carriers of all sizes, most of them small, reached 3,773 in August 2026.

When will the scheme start?

No date has been given. It was described on 1 September 2026 as a scheme the Ministry is “looking at”; previous schemes took six to nine months from announcement to notification, so early 2027 is the realistic earliest.