Indian Supreme Court OKs Larger Diesels in Delhi

MUMBAI – The Supreme Court of India lifts a ban on diesel vehicles with engines larger than 2.0L from operating in Delhi, the capital city considered one of the world’s worst in terms of air pollution.

Buyers of diesel cars will be required to obtain mandatory registration by paying an emission compensation charge equal to 1% of the vehicle’s showroom price. The charge may be increased in the future, the court ruled Friday.

Domestic automakers and importers estimate they lost Rs75 billion ($1.2 billion) in business since the ban was imposed in December in India’s third-largest city that, along with the district surrounding it, has a population of 13 million.

Mercedes-Benz and Toyota were among the automakers hit hardest by the ban, which effectively kept their sedans and larger SUVs off Delhi streets. Toyota lost an estimated 8,500 sales and Rs17 billion ($265 million) alone.

But a major domestic manufacturer, Mahindra & Mahindra, enjoyed robust sales simply by circumventing the ban by altering its 2.0L diesel engines to 1.99L, installing many of them in its popular SUVs and adding gasoline-powered variants to what had been an all-diesel lineup.

Mercedes, which sells diesel cars exclusively and took the case before the Supreme Court, complains the 1% tax falsely assumes its vehicles contribute to pollution. That position is supported by government officials who argue the courts lack authority to ban vehicles which did not exceed emissions standards and only legislators can approve tax increases.

Market leader Maruti Suzuki also opposes the 1% levy, arguing it could impede efforts to rebuild sales numbers, the BloombergQuint business publication reports.

Lifting the ban may not necessarily revive diesel demand in the Delhi region. Gasoline costs about 13% more than diesel, compared with a difference of 50% a few years ago.

The Supreme Court ruling on diesel sales in India does not settle the question. The National Green Tribunal, created by Parliament in 2010 to hear environmental-protection cases and assess damages continues to ban diesel passenger vehicles at least 10 years old from roads in six towns in Kerala state.

However, questions surround the enforcement in those towns and in Delhi itself.

The NGT with jurisdiction over Delhi has asked the city’s Transport Commissioner to immediately deregister all 10-year-old diesel cars and light trucks and has asked the commissioner to give a list of these vehicles to the Traffic Police.

Traffic Police Tasked With Checking 1.5 Million Vehicles Daily

But 900,000 vehicles, including 200,000 diesels, are registered in Delhi and another 600,000 vehicles enter the city daily. The NGT has left it to the Transport Commissioner and Traffic Police to verify whether a vehicle is on the list.

Unlike importers Mercedes and luxury rivals BMW and Audi, both of which offer a few diesel models, automakers that build and sell lower-cost cars are caught up in a net of regulations passed by the NGT, although its decisions can be appealed to the Supreme Court.

Beyond trying to regain lost ground in a huge market, automakers have had to change design, production and marketing strategies. New-generation diesels are touted as being quieter, more efficient and more powerful as well as less-polluting. But the technological advancements have been undone by trucks and older diesel engines still on the road.

Every automaker has had to adjust investments, change designs and production systems, and have had to wait for the Supreme Court’s order to be handed down in its final form.

Large diesel cars already face much higher excise duties; those with engines 2.0L or larger are taxed 25%; those 0.5L or more at 24% and smaller vehicles at 12.5%. Larger diesels also are subject to higher infrastructure fees and registration charges, the Financial Express reports.

India’s auto-emissions-control systems are run informally at best. New vehicles are sold with a certificate stating “Pollution under Control,” but owners can obtain similar certificates from authorized agents – some operating out of vans parked at street corners – and the reliability and validity of those certificates have gone unchecked.

Automakers are citing a 2014 study by the Indian Institute of Technology Kanpur, a public research college that showed vehicles contributed 10% to 20% of particulate matter in Delhi’s air, while road dust was 38% to 56%, with the rest unaccounted for. No action to control road dust has been has been taken.

Reports on anti-pollution measures being taken in Delhi are due in 2018, but enforcement and effectiveness may not result in a scenario much different from the current one.