The Tamil Nadu government has proposed floating a fresh tender to induct 500 electric buses across Chennai, Madurai, and Coimbatore under the Gross Cost Contract (GCC) model, after Germany-based development finance agency KfW approved the cancellation of an earlier procurement process on 18 June 2025. The move signals a structural shift in how the Vijay government intends to expand public electric mobility in the state.

Why the Earlier Tender Was Scrapped

The original tender, floated in 2024, envisaged private companies supplying and maintaining the buses for a fixed period while state transport corporations retained operational control. The transport department moved to cancel that tender in March 2025, citing the need for a more financially sustainable model. KfW, which is funding the project, formally approved the cancellation request on 18 June.

How the GCC Model Works

Under the proposed GCC framework, private concessionaires will procure, own, and operate the buses entirely. They will also hire drivers and support staff, collect passenger fares directly, and remit an agreed share of daily revenue to the respective state transport corporations. Transport department officials confirmed the proposal is now awaiting KfW's response before implementation can proceed.

Officials believe the model will substantially reduce the financial burden on transport corporations by eliminating capital expenditure on vehicle procurement, maintenance, fuel costs, and employee salaries. The Metropolitan Transport Corporation (MTC) has already adopted this approach and currently runs more than 600 buses under similar GCC arrangements. The operating cost under existing contracts stands at approximately ₹77 per kilometre for non-air-conditioned electric buses and ₹81 per kilometre for air-conditioned variants.

MTC's Parallel Fleet Expansion

Separately, the MTC has floated four tenders to further expand its electric fleet. These cover the procurement of 20 double-decker air-conditioned electric buses, 1,300 standard air-conditioned electric buses, and 220 smaller air-conditioned buses aimed at strengthening first- and last-mile connectivity across Chennai. This expansion runs alongside the proposed GCC rollout and underscores the scale of Tamil Nadu's electric mobility ambitions.

Union Pushback Over Privatisation Concerns

K. Arumuganainar, general secretary of the CITU-affiliated Tamil Nadu State Transport Employees Federation, has alleged that the GCC expansion amounts to the gradual privatisation of public transport. He argued that state transport corporations should continue to directly procure and operate buses, warning that increasing dependence on private operators could erode the long-term financial health of transport undertakings — drawing a parallel, he said, to what occurred in the power sector.

Service Disruptions Add to Pressure

The policy debate comes as the MTC faces operational scrutiny over recent service cuts across Chennai. On Tuesday alone, reportedly 162 scheduled services were cancelled. While officials attributed the disruptions to administrative reasons, employees claimed shortages of drivers, conductors, and spare parts were the actual cause. The MTC currently operates 3,858 scheduled services daily across 686 routes, making any sustained reduction in services a significant concern for daily commuters.

With KfW's response still awaited, the pace of the GCC rollout will depend on how swiftly the funding agency clears the revised proposal.