Home Articles SC ban hurts auto inc

SC ban hurts auto inc

SC ban hurts auto inc

The Supreme Court bans the registration of new diesel cars and SUVs above 2000 cc in the NCR region for three months along with other rulings, stunning the automakers.

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In a strong step to release the stranglehold of air pollution on the capital city, the Supreme Court imposed a ban on the registration of diesel-run private cars of the capacity of 2000 CC and above and SUVs, noting that these vehicles are used by the rich and the common man or average citizen will hardly feel the pinch. The 11-page order by a bench led by Chief Justice of India T S Thakur reasoned that these high-end diesel vehicles were more prone to cause higher levels of pollution. Other key decisions taken by the apex court to curb Delhi and NCR’s pollution were: 100 per cent raise in green cess to be levied on commercial vehicles entering Delhi; prohibition on non-Delhi bound commercial vehicles from entering through NH-8 and NH-1; prohibition on commercial vehicles registered before 2005; Only CNG run taxis to be allowed to ply and light commercial vehicles with two axles will have to pay Rs 1,400 and with four axles to pay Rs 2,600 for entering Delhi.

Delhi is the largest passenger vehicle market in the country with a 7 per cent share. For luxury cars, Delhi accounts for 18 per cent of nearly 38,000 luxury cars sold in India annually. Of this, almost
80 per cent are diesel vehicles. More than half of them have a capacity below 2 litre.


The ban has invoked mixed reactions from a large cross section of industry stakeholders, legal experts, consultants and others.

Vinod Dasari, President, Society of Indian Automotive Manufacturers (SIAM) commented, “Actually, SIAM had been proposing this ban to the government for quite some time. It has a couple of positive benefits. It provides for much better emissions and much better pollution levels from newer vehicles
Secondly, it will certainly boost the industry as newer vehicles will be purchased. Because of this, the tax revenue will be better. However, a DS4 diesel vehicle contributes 30-35 per cent less to greenhouse gas emission than a petrol equivalent. But after diesel being termed bad, more people will move to petrol vehicles. As a result, the CO2 level will go up by, say, 30 per cent. It is simply against what Prime Minister Narendra Modi talked about at COP 21. There is no option; you just have to meet the requirements the Supreme Court has mandated. There is no question of anybody not abiding by it.” He further added that such decisions need to be based on scientific fact and proper studies. “As the President of SIAM, my personal view is that this move will have very little impact on Delhi’s pollution levels. It will be only be counter-productive because more people will now migrate to petrol cars,” he observed.

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SIAM has said the Court should encourage more BS-IV vehicles to be sold and restrict use of older vehicles that pollute more, as one old vehicle causes emissions equivalent to five new vehicles.

The Chairman and Managing Director of a leading engine manufacturing company in India also spoke on the same lines as he said, “Diesel engines manufactured in India are cleaner ones which are compliant with the required emission norms. On the other hand, petrol engines can cause more pollution than diesel engines.”

Reacting to the new development, Umang Kumar, President, CarDekho.com, said, “As a young father of a seven-month-old son, I am very happy to see proactive steps being taken to solve the pollution problem in Delhi. However, I am not fully in sync with the way the Honorable court has addressed the situation. Dealers and OEMs should be given at least six months to a year for capacity planning and inventory liquidation. Delhi is close to 15 per cent of luxury sales and such a small time-window can create losses for OEMs who have invested in manufacturing capacities of diesel vehicles. Dealers specialising in luxury cars may face a major hit. Additionally, employees of these OEMs and dealerships could be out of jobs. The court should give more time to the industry stakeholders to allow them to plan for it in a more logical fashion.”

Zakir Merchant, Partner, Khaitan & Co, said, “Emission norms applicable to diesel vehicles are primarily governed by the provisions of the Motor Vehicles Act, 1988 and the Central Motor Vehicles Rules, 1989. BS-IV standards only apply to certain large cities while the rest of India is still on BS-III standards. Migration to higher standards is the need of the hour. The order of the Court in part has directed a segment of luxury vehicles which in
the ideal world would meet NOx levels
as per Indian standards. It may be unfortunate for manufacturers to be banned who are meeting emission norms. A review petition on this particular issue with stronger scientific data could be the way forward.”

Welcoming the moves by Supreme Court and the governments on curbing environment pollution in and around Delhi,
SP Singh, Senior Fellow, Indian Foundation of Transport Research and Training (IFTRT) also suggested certain steps as he said, “The IFTRT is of the opinion that registration of diesel run passenger cars/SUVs should permanently be banned in Delhi and it should also be ensured that neighbouring areas of National Capital Region (NCR) in Haryana and UP too follow the suit. But in the case of diesel run trucks while registration of BS-III compliant trucks should be totally banned in entire NCR and instead only BS-IV compliant trucks should be permitted to be registered, irrespective needing local and/or National Permit and the movement of trucks only having BS-IV compliance should be allowed to have intra-NCR carriage of goods. The gazette notification dated February 23, 2012 of Ministry of Road Transport and Highways (MoRTH), Government of India that goods carriages/trucks registered in NCR including Delhi and having National Permit shall not be allowed to pick and drop goods within NCR unless they conform to BS-IV emission norm as per rule 115 of CMVR, 1989.”

Although Mahindra & Mahindra in a release said that the company respects the Supreme Court order aiming at cleaning the Delhi air. However, it expects the judiciary and regulators would look into the impact of these measures after the interim period of March 31, 2016 and take a holistic view on improving the air quality of
Delhi, taking into account the overall impact of each action. The company’s Chairman and Managing Director
Anand Mahindra, tweeted, “So, even if we believe the decision on diesel vehicles isn’t optimal, we’ll honour it and develop vehicles that comply with
their stipulations”.

Vikram Kirloskar, Vice Chairman, Toyota Kirloskar Motor, opined that there has to be focus on other areas as well if the pollution is to be reduced. “To improve the air quality from vehicle point of view we must take a comprehensive view of various factors causing pollution, related to infrastructure, driving behavior and compliance of existing emission norms.”

Expectedly, Mercedes-Benz, which recently invested Rs 250 crore in its Indian business, is upset. Roland Folger, Managing Director and CEO, Mercedes-Benz India, said, “Our decision to invest in India was purely based on the stability of business environment here. However, such a drastic change in policy makes it very difficult for us to plan our expansion and investments and will also adversely affect the `Make in India’ campaign.”

Rajiv Bajaj, Managing Director, Bajaj Auto, said, “Cars don’t just pollute and congest, but indeed when we consider the large number of road fatalities, who is it that is primarily responsible for running over all poor pedestrians, cyclists, two-wheeler riders and three-wheeler passengers”

SC ruling and BS-V propagation

SIAM response to sc ban

The Automobile Industry appreciates the concern of the Hon’ble Supreme Court on the high levels of air pollution, especially particulate matter emissions in Delhi. The pollution issue in Delhi needs to be looked at holistically if the objective of improving the air quality is to be achieved, said SIAM. In light of this, the Hon’ble Supreme Court Order banning private diesel passenger vehicles and SUVs of
2000 cc engine capacity and above, is most unfortunate. While this would certainly hurt some segments of the automotive industry, it will not bring about any perceptible improvement in the air quality of Delhi. However, Auto Industry welcomes the Hon’ble Court’s direction for controlling pollution from other sources which has been neglected for last couple of decades.

This order has been passed after totally ignoring the findings of the most summary of the recent study on source apportionment for NCT of Delhi shared with the Court, which mentions that the vehicles are responsible for only 20 per cent of the pollution in Delhi, out of which only 14-15 per cent is attributable to passenger cars. This makes the overall pollution load of passenger cars a miniscule number of just 3 per cent. Restricting sales of BS IV compliant vehicles will further delay the proportion of BS IV vehicles on the road, while older BS 1/2/3 vehicles would continue to ply. If reduction of pollution was the objective, the Hon’ble Court could have encouraged more BS IV vehicles to be sold and could have restricted use of older vehicles that pollute more, as one old vehicle emits emissions equivalent to five new vehicles. Hence, old vehicles entering from outside should also pay environmental compensation tax. Bringing in better technology to replace older technologies would have been more effective in meeting the challenge of pollution and air quality.

The auto industry is also concerned on the unavailability of a comprehensive action plan for addressing the issue of air pollution in Delhi, which was stated by SIAM after the order was passed by the Hon’ble Supreme Court. Way back in 2003, the Auto Fuel Policy had recommended several measures to address the issue of air pollution. Out of these, only handfuls of recommendations concerning the auto industry were implemented while no action was taken on the other causes of pollution. Single minded approach to address only the auto industry which is a soft target has resulted in high pollution continuing in Delhi, despite of auto industry moving rapidly to BS IV norms within a short period of 10 years – a feat not performed by any other country till date. It is distressing to note that lessons from the past have not been learnt.

Historical data shows that the pollution levels in Delhi always rise from September to December and always starts falling from January till August onwards, whether the number of vehicles increases or not. Therefore, taking any decision to ban a certain segment of vehicles based on rising pollution from September to December would not yield the desired result.

SIAM suggests the following measures if pollution has to be effectively addressed:

  • Complete the construction of bypasses in Delhi, which has been delayed for several years, so that the truck traffic not destined for Delhi could be effectively diverted.
  • Have accountability to ensure that burning of biomass and paddy fields is immediately stopped in and around NCR.
  • Employ dust collectors and vaccum cleaners to clean the dust on the road kerb-sides
  • Urgently lay down a policy for remove and scrappage of old and highly polluting vehicles off the road.
  • Constitute an Expert Committee consisting of all stakeholders to draw up an holistic action plan for short, medium and long term with quantifiable targets based upon data to ensure sustained air quality improvements.

The auto industry is of the view that the order has been passed after ignoring the recent findings by IIT Kanpur regarding Delhi’s pollution. The study says that the vehicles are responsible for only 20 per cent of the pollution in Delhi, out of which only 14-15 per cent is attributable to passenger cars. This makes the overall pollution load of passenger cars a mere 3 per cent.

While accepting the Apex Court’s decision, the industry says that the SC ruling will adversely impact the propagation of BS-V norms. Auto companies have been told to roll out BS-V by April 2019 and BS-VI by 2021. Restricting sales of BS-IV compliant vehicles will further delay the proportion of BS-IV vehicles on the road, while older BS-1, 2, 3 vehicles would continue to ply.

Nursing the wounds

The SC ban and the NGT initiatives have already resulted in a pile up of Rs 1,000 crore worth diesel vehicles in Delhi NCR. Vehicle manufacturers are looking for options to sell these vehicles as they have to direct them to other markets outside Delhi-NCR. During this ban period, they are likely to focus on petrol engines to minimise the business loss.

What may happen

Currently, the court order involving diesel vehicles has led to the overall sentiment of unpredictability in the regulatory environment which only forces companies to keep going back to the drawing board, thus wasting both time and money. There are major ripples in the share market of auto industry.

Some say that the auto industry is likely to have negotiations/dialogue with the government and provide a permanent solution, which could lead to banning of the older vehicles (which have more population and are relatively more polluting) or further improvement in emission standards for new vehicles, which could then possibly result in the ban not extending beyond March 31, 2016. Lastly, imposition of similar bans in other metros and large cities cannot be ruled out.

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