India can fully finance its ambitious plan to support State transport undertakings (STUs) to introduce electric buses on a mass scale, even if the committed assistance from the United States does not materialise, said Union Minister of Heavy Industries and Steel, H. D. Kumaraswamy.

The Minister’s assertion comes after it was speculated that the United States government’s decision to shut its international aid programme will impact the country’s Payment Security Mechanism (PSM), which is meant to finance the purchase of e-buses by STUs.

“We can go ahead with the funding on our own in case there’s some unforeseen situation,” Minister Kumaraswamy told businessline.

“In the Budget 2025, ₹500 crore have already been provided for the PSM scheme. There is no stopping the scheme.”

Safety net

According to sources, the Union cabinet’s decision on PSM made last year has provisions in place in case the US funds are stopped.

“PSM scheme is on track; there is no question of any disruption. We had already made provisions for any eventuality. These provisions were already decided as a safeguard for the smooth implementation of the scheme,” a senior ministry official told businessline.

The development comes as US-based billionaire Elon Musk, who has been tasked by the newly-elected US President Donald Trump to trim down government expenses via the Department of Government Efficiency (DOGE), decided to bring the shutters down on the United States Agency for International Development (USAID).

As per industry sources, the impact of the USAID’s closure on the PSM scheme and subsequently on the e-bus programme will not be felt since the committed amount forms a minuscule part of the total outlay.

“The committed amount is only $15 million,” sources said.

Shift to e-buses

Sources said that earlier, the USAID and GEAPP programme had committed $150 million grant to fund the scheme; however, there is not much clarity on this money.

Last year, the Union Cabinet, to promote the usage of electric buses in public transport, approved the PSM scheme, which is expected to support the adoption of 38,000 eBuses in 169 cities.

The mechanism has an outlay of ₹3,435 crore, which ensures timely reimbursement of funds to manufacturers.

Under the mechanism, the Reserve Bank of India (RBI) will pay the agreed monthly lease amount to e-bus manufacturers in case of a default by STUs.

After a grace period, the default amount will then be deducted by RBI from the respective STU state government’s account held with the apex bank via the ‘Direct Debit Mechanism’.

The scheme was approved partly in response to the request of e-bus manufacturers to ensure timely payments for the supply of these vehicles to STUs.