KfW-funded low-floor bus tender cancelled in March by former DMK govt

CHENNAI: The State government has cancelled the KfW-funded tender for the procurement, operation and maintenance of 500 low-floor electric buses for Chennai, Coimbatore and Madurai, citing technical reasons, a move that underscores a likely shift towards the Gross Cost Contract (GCC) model already being adopted under World Bank-funded projects.

The KfW approved it only a few days ago, but the previous government had cancelled the tender in March. The Institute of Road Transport (IRT), in a cancellation corrigendum, said the decision was taken at the 349th Tender Award Committee meeting on March 6, 2026. The proposal was subsequently sent to German development bank KfW, which issued its no-objection for cancellation on June 18.

The tender had reached the financial bid stage, with JBM Electric Vehicles Pvt Ltd emerging as the highest bidder after technical evaluation, while Switch Mobility Automotive Ltd was the other qualified bidder.

Sources said the tender was cancelled considering the high capital cost of procuring the electric buses, developing charging and depot infrastructure, and undertaking long-term maintenance commitments. They added that the Transport Department was planning to modify the procurement framework and move to the GCC model for future electric bus acquisitions.

The cancelled KfW project differed significantly from the World Bank-funded electric bus projects currently being implemented in Tamil Nadu.
Under the KfW model, the transport corporations themselves were to procure and own the buses, while the selected contractor would be responsible for operation and maintenance, charging infrastructure, depot modernisation and driver deployment. The government would bear the upfront capital expenditure on the buses and separately pay the contractor for operations and maintenance.

In contrast, the World Bank-funded projects are being implemented under the GCC model, under which the private operator owns the buses, invests in charging infrastructure, undertakes maintenance and supplies drivers. The transport undertaking pays the operator a fixed rate per kilometre, avoiding large upfront capital expenditure.

Former Transport Secretary K Phanindra Reddy said on X that the model was designed to enable bus suppliers to pass on savings arising from lower borrowing costs to the government. "If it did not happen, no point in going ahead with the tender," he said, adding that if the government preferred to defer capital expenditure, the GCC model remained the better option. He also suggested that Tamil Nadu should seriously explore the benefits available under the Centre's PM e-Drive scheme.