Car makers await decision on diesel vehicle ban in NCR

The last day of a financial year is important for companies. But March 31, 2016 is going to an extremely important one for car manufacturers. The fate of diesel cars with an engine capacity of 2,000 cc and above in the National Capital Region (NCR) will be decided by the Supreme Court tomorrow.

Dealers and car manufacturers are hopeful of an end to the ban on sales and registration of such vehicles. According to the December order of SC, the ban was imposed till March 31, 2016. The ban is first of its kind and companies like Mahindra & Mahindra, Toyota, Mercedes and Jaguar Land Rover among others took a huge blow on sales. 

Dealerships of these companies in NCR also faced hardships. A dealer in NCR for Mercedes said the removal of ban will help in normalising the business for him and several other dealerships from different companies.  

Another development while the ban was in place is the imposition of the cess on cars on the basis of the fuel type and engine capacity by the Centre. The Union Budget imposed 1% cess on petrol or CNG cars, with an engine capacity of up to 1,200 cc and length of up to four metres. For diesel cars of a similar length and engine capacity of up to 1,500 cc, the cess is 2.5% of the price. 

The Budget also proposed a cess of 4% on cars with a higher engine capacity, but it has not yet been notified. The government has attempted to discourage sales of diesel cars by imposing a much higher cess. The SC ban was also aimed at addressing pollution by stopping registration of higher capacity diesel vehicles.

Companies have tried to overcome the crisis arising out of the ban. Largest utility vehicle maker Mahindra responded by advancing the launch of 1,990cc diesel engine (that was being developed for the global market) for vehicles in NCR. The new engine M&M launched in January end has taken care of its NCR dealers who are able to sell models like Scorpio, Bolero and XUV500. 

Mercedes was the worst hit among luxury car makers since its diesel vehicle range started with an engine of over 2,000cc. The largest luxury car player convinced its dealers outside NCR to give up their allocations of petrol to be made available for the dealers in NCR. That has worked to a certain extent. Toyota, however, has suffered since its two popular models- Innova and Fortuner have not been sold in the NCR for over hundred days now.

The industry has argued before the SC that diesel cars are a tiny contributor to pollution. In its arguments, industry body, Society of Indian Automobile Manufacturers, cited a draft report of Indian Institute of Technology-Kanpur, according to which diesel cars account for 2% of particulate matter (PM) 2.5, an air pollutant. “Of this two%, at least 1.5% of PM2.5 is attributable to BS-I, II and III cars. The BS-IV-compliant cars, registration of which is banned, contribute to a minuscule 0.5% to total PM2.5 emission in Delhi”, it told the court.