PM-eBus Sewa Payment Security Mechanism (PSM)

What is the PM-eBus Sewa Payment Security Mechanism?

PM-eBus Sewa Payment Security Mechanism (PSM) is a Central Sector scheme of the Ministry of Heavy Industries, approved by the Union Cabinet in 2024 with an outlay of Rs 3,435.33 crore, to remove the single biggest financing obstacle to electric bus adoption in India: the risk that a state transport undertaking will not pay its operator on time.

Electric buses in India are largely deployed on the Gross Cost Contract (GCC) model, where a manufacturer or operator owns the buses and is paid a per-kilometre fee by the public transport authority. That fee stream is what banks lend against. If public transport authorities have a record of delayed payments, lenders price in the risk or decline entirely. PSM addresses this by creating a dedicated Payment Security Mechanism Fund that pays the operator when the transport authority does not, and then recovers the money from the authority or, failing that, straight from the state's account at the Reserve Bank of India.

According to the scheme guidelines dated 28 October 2024, PSM supports deployment of more than 38,000 electric buses from FY 2024-25 to FY 2028-29, and provides payment security coverage for up to 12 years for each bus deployed. The Direct Debit Mandate a state signs is valid for all Government of India sponsored schemes for procurement and operation of e-buses, not just one.

For the deployment scheme that puts buses on city roads, see the separate PM-eBus Sewa guide on this site; PSM is the financial backstop behind it and other e-bus programmes, not a replacement for it.

Who is eligible for PM-eBus Sewa PSM?

Public transport authorities can participate if:

• They adopt the Gross Cost Contract (GCC) model for e-bus procurement, aligned with the scheme guidelines. Other similar models may be considered with Steering Committee approval.
• Their parent state or UT registers a Direct Debit Mandate (DDM) with RBI for the entire duration of the scheme.
• They procure and operate e-buses with aggregation by CESL under any Government of India, state or UT scheme, with a Concession Agreement that adheres to the scheme guidelines.
• PTAs procuring directly without CESL may be considered by the Steering Committee, which also decides the fee structure charged to them.

"Public transport authorities" here means State Transport Undertakings, State Transport Corporations, special purpose vehicles and any other government agency operating bus services in India.

OEMs and operators can claim if they have entered into a Concession Agreement with a PTA that meets the criteria above.

These cannot apply:

• Individual citizens, bus commuters and private fleet owners are not eligible and cannot apply. PSM is a contract-level guarantee between institutions. There is no beneficiary registration, no subsidy to a person, and no DBT payment to an individual under this scheme.
• PTAs whose state has not registered a DDM with RBI cannot draw on the fund, however good their contract otherwise is.
• Contracts outside the GCC model and outside the scheme guidelines, unless specifically approved by the Steering Committee.

How does the PM-eBus Sewa PSM fund work?

In normal operation, nothing in the scheme is triggered: the OEM or operator invoices the PTA, and the PTA pays from its escrow account under the Concession Agreement.

The mechanism activates only on default:

• The PTA must open and maintain an escrow account as specified in the Concession Agreement.
• The OEM or operator submits invoices per the agreed timelines; the PTA processes them per the agreement.
• If insufficient funds in the escrow account cause delay or non-payment within the prescribed time, that is a "Default by PTA".
• The default is reported to CESL, and the OEM or operator may file a PSM Request on the technology platform CESL maintains.
• CESL reviews, verifies and approves the request against the Concession Agreement, the scheme guidelines and the Standard Operating Procedures, and disburses the approved amount from the scheme fund into the escrow account. The PTA must pass it to the OEM or operator immediately, without conditions.

What does a defaulting authority have to repay?

• The PTA must repay the entire amount disbursed, plus Late Payment Surcharge, within 90 days of disbursement.
• Late Payment Surcharge (LPS) is levied at 1% per annum over SBI's three-year MCLR prevailing on the date of disbursement, compounded annually.
• LPS accrues from the date CESL pays the operator until the date the money reaches the scheme fund.
• If the PTA does not repay within 90 days, the Ministry of Heavy Industries requests RBI to invoke the Direct Debit Mandate. RBI debits the state or UT account and credits the scheme fund, subject to a clear and sufficient balance — that is, the balance excluding minimum balance, special drawing facility operating limit, ways and means advances limit and overdraft.

Under the mandate format, a written request from the Ministry to RBI is conclusive proof of default, and the state need not separately admit it. The mandate is irrevocable except with the prior concurrence of the Ministry, and states must provide for such repayments in the state budget.

How to apply to join the PM-eBus Sewa PSM scheme

1. The state or UT government signs the irrevocable Direct Debit Mandate in the format at Annexure 1 (states) or Annexure 2 (UTs) of the scheme guidelines and sends it to the Chief General Manager, Reserve Bank of India, Central Accounts Section, Nagpur.
2. RBI confirms and acknowledges the mandate.
3. The state or UT communicates its e-bus procurement requirement to CESL.
4. The PTA adopts the GCC model and executes a Concession Agreement with the selected OEM or operator, following the Model Concession Agreement issued by CESL. A PTA procuring directly, without CESL, must get Steering Committee approval for inclusion.
5. The PTA opens the escrow account specified in the Concession Agreement.
6. The PTA and the OEM or operator onboard onto CESL's technology platform and follow the SOPs issued by CESL and approved by the Steering Committee.
7. On a payment default, the OEM or operator files a PSM Request on the platform; CESL verifies and disburses to the escrow account.
8. The PTA repays the fund with LPS within 90 days, failing which the DDM is invoked through RBI.

Who governs the PM-eBus Sewa PSM scheme?

A Steering Committee chaired by the Additional or Joint Secretary (Auto), Ministry of Heavy Industries, oversees the scheme. Members include an Adviser from NITI Aayog, Additional or Joint Secretaries from MoHUA, the Department of Expenditure, the Ministry of Road Transport and Highways, and the ministry running any e-bus scheme, with the Managing Director and CEO of CESL as convener. The committee meets at least once a quarter.

Its remit includes monitoring performance, recommending DDM invocation to the Ministry, approving SOPs, approving fund requirements for administration, training and the technology platform, admitting non-CESL PTAs and setting their fee, and approving outward remittance to the Consolidated Fund of India once the scheme fund grows beyond Rs 4,000 crore, subject to a maximum of the Government of India grants.

CESL, as implementing agency, manages the fund, coordinates with ministries, OEMs, PTAs, states and RBI, drafts and vets agreements, issues SOPs and the Model Concession Agreement, builds and runs the claims platform, processes claims, arranges audits, trains PTAs and acts as secretariat to the committee.

Reporting and dispute resolution under PSM

CESL prepares quarterly status reports for the Steering Committee, covering defaults by PTAs and payments made, interest earned on the fund, repayments received, DDM recoveries, a debit-credit statement, and LPS levied and received. It also prepares annual accounts and facilitates a CAG audit, plus an annual report on fund utilisation by state, UT and PTA. Disputes between a PTA and an OEM or operator are settled under the dispute resolution clause of their own Concession Agreement, not by the ministry.

Scheme funds may be used only for paying OEMs and operators on default, running the technology platform, CESL's administrative and operating costs, capacity building, and anything else the Steering Committee approves.

What this means for bus passengers

PM-eBus Sewa PSM has no application form for a member of the public and pays nothing to an individual. Its effect on a commuter is indirect: by making the payment stream to operators bankable, PSM is intended to lower financing costs for electric buses and keep services running when a transport undertaking is short of cash. If you are looking for the scheme that actually funds e-buses for your city, read the PM-eBus Sewa guide; if you want the wider electric vehicle demand incentives, see the PM E-DRIVE guide.