Diesel Dilemma

For the domestic automobile industry, it is going from bad to worse. It was already reeling under the three-month ban on the registration of diesel cars above 2,000 cc in Delhi-NCR, which was to end on March 31. Now, the Supreme Court is considering a 30 per cent Environment Compensa-tion Charge (ECC) on diesel cars to lift the ban. The passenger car industry had just started showing signs of a recovery with the best five-year growth figures of 7.24 per cent in 2015/16. But with Delhi-NCR accounting for 20 per cent of the volumes for high-end diesel cars, the proposed tax, if imposed, would literally kill the segment. Sale of diesel cars above 2,000 cc had slumped to a five-year low last fiscal.

Talks of lifting the ban, however, come as a big relief for Toyota Motor, Mercedes-Benz, Mitsubishi Motors and Mahindra and Mahindra, which have been the worst hit. But realising that the odds are heavily stacked against them if the ECC comes into effect, the CEOs of all auto companies, under the aegis of Society of Indian Automobile Manufacturers (SIAM), agreed to present their case before the court. "It was a critical meeting where auto companies decided to go for a common counsel and effectively take up our concerns before the apex court," a top functionary told BT.

Automakers would also apprise the court of the recent improvements in technology that effectively reduce NOx emissions and increase fuel efficiency, and the conventional benefits of lower CO2 emissions of diesel engines. Experts also say the extensive use of diesel particulate filter would also bring PM emissions on a par with petrol engines by 2020. Says Roland Forger, MD and CEO, Mercedes-Benz: "It's easier for us to bring petrol options, but frankly speaking, more petrol is a not a good solution because CO2 level rises with petrol. We are trying to convince the legal system of this."

Recent surveys have rated Delhi as the most polluted city in the world. The apex court had argued that diesel vehicles are more polluting than petrol variants and were one of the reasons for rising air pollution. It had suggested extension of the ban for fresh registrations for another six months or a 30 per cent ECC. The auto industry, however, argues that vehicles contribute a minor percentage to the total air pollution, while industrial- and construction-related pollution are more responsible for Delhi's poor air quality. According to Vishnu Mathur, Director General, SIAM, the auto industry is already highly taxed. "If any cess or restraint has to be imposed, it should be on older vehicles and not hurt the best-in-class vehicles with the latest technology," he says.

Amid the debate, the Centre has come out with a draft notification to directly switch over to Bharat Stage VI by 2020. The move is likely to bring some respite to the pollution issue and allow the auto industry to gradually fulfil its commitment of a greener tomorrow.