NEW DELHI, October 14 — The Union Cabinet, chaired by the Prime Minister, on Wednesday approved the implementation of a dedicated Payment Security Mechanism (PSM) scheme with a financial outlay of ₹3,435 crore to facilitate the procurement and operation of over 38,000 electric buses across public transit fleets.
According to the Ministry of Heavy Industries, the sovereign guarantee mechanism directly addresses revenue risk perceptions associated with financially stressed State Transport Undertakings (STUs). Operating under the Gross Cost Contract (GCC) Public-Private Partnership model, private concessionaires operate the electric buses while STUs pay fixed per-kilometer operational fees. In the event of default or delayed remittances by an STU, the designated nodal entity—Convergence Energy Services Limited (CESL)—will disburse timely operational cash flows directly from the PSM liquidity reserve.
Cabinet ministers highlighted that mitigating municipal credit default risks will unlock lower commercial debt financing costs from domestic banks and multilateral green climate funds, accelerating the phase-out of internal combustion engine fleets across 169 non-metro cities by FY 2028-29.
The policy architecture of the PM-eBus Sewa initiative (sanctioned in 2023), the PM E-DRIVE Scheme replacing FAME-II, the mechanics of Gross Cost Contracts (GCC) versus Net Cost Contracts (NCC), urban air quality management under the National Clean Air Programme (NCAP), and municipal fiscal autonomy are foundational examination topics across UPSC Civil Services (GS-III: Sustainable Infrastructure & Urban Mobility) and State PSCs.