Blended financing application in Indian cities’ clean transportation financing

World over policies for climate change adaptation and mitigation have brought vehicular emissions and electric vehicles to the forefront of the discourse. One of the key challenges faced by developing countries currently is achieving affordable and efficient bus fleet electrification. The transition to electric buses is instrumental in addressing environmental concerns and urban mobility challenges in cities, including those in India. However, financing these buses in India is a key challenge due to higher upfront costs and the poor financial health of city bus transport utilities. There is insufficient public capital available for cities to transition to electric buses. Moreover, public capital is incredibly precious. In this context, cities must find innovative ways to use existing financial products and alternative funding sources to raise capital for electric bus procurement. Appropriate financial structure and risk-sharing mechanism that align the interests of various stakeholders are crucial in helping attract private capital. In this application-based paper, we have proposed a blended financing mechanism that can leverage public capital to raise private capital and build public–private models for deploying electric buses in cities. We have also proposed a risk-sharing mechanism that aligns the interests of various stakeholders. We add to the existing pool of literature on blended finance by demonstrating its use in the context of sustainable finance and urban mobility—two areas where its appropriate use is yet to be sufficiently explored. We use a financial model to show that a blended financing mechanism that combines commercial and concessional capital can make electric bus projects in Indian cities bankable and financially feasible.