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Indian to push auto industry for cleaner vehicles by 2020

25 July 2018 Nitin Budhiraja

IHS Markit perspective

  • Implications: The alarming air pollution level in India is driving the government to implement strong measures, including the shift to cleaner fuels.
  • Outlook: The Indian government also unveiled a draft national auto policy in February 2018 that aims to promote low-emission mobility in the country. The policy aims at adopting a long-term roadmap for emission standards beyond the Bharat Stage VI stage and makes it consistent with global standards by 2028.

The government of India is pushing to stop the manufacturing and sales of non-Bharat stage -VI (BS-VI) emissions norms-compliant vehicles from 1 April 2020, according to the Press Trust of India. In a statement to the Supreme Court of India, the government said that any further delay in imposing the regulation could reduce the environmental benefits to be accumulated from using the cleaner BS VI fuel. The public-sector oil marketing companies have already made investments of INR280 billion (USD 4.06 billion) for upgrading refineries to supply BS-VI fuels.

The Road Transport and Highways Minister of India, Nitin Gadkari, had earlier said in a meeting with the automotive industry executives in January 2016 that Indian government was committed to introducing BS-VI emission standards in the country by April 2020. The meeting was attended by 26 chief executive officers (CEOs) and representatives from car and motorcycle manufacturers. Although the industry representatives expressed concerns regarding the development of the necessary emissions technology by this timeframe, they agreed to make efforts to roll out BS-VI-compliant vehicles

The Society of Indian Automobile Manufacturers (SIAM), referring to an earlier notification from the government has said that the registration of private vehicles manufactured up to 1 April 2020 should be allowed until 30 June, 2020, according to the report.

Meanwhile, a policy proposing the ban on commercial vehicles that are 20 or more years old is expected to go for cabinet agreement soon, according to a report by the Economic Times. The report cites an unnamed top government official, who said, "We have proposed to fix 20 years as the lifetime for commercial vehicles. The vehicle scrapping policy will come into force from 2020, after which any commercial vehicle that completes 20 years would go off the road … We are hoping to get the cabinet's nod soon." According to the report, there are about 700,000 commercial vehicles registered before year 2000 that are currently on the roads. There are a few incentives proposed under the CV scrappage policy. These include a reduction in the goods and services tax (GST) at the time of purchasing new vehicles, fair value for the scrap, and discounts from vehicle manufacturers. These incentives are expected to cut the cost of new vehicles by 15% on average.

Outlook and implications

The pollution level in India has increased substantially and reached alarming levels over the last few years, especially in the metropolitan cities such as Delhi, Gurgaon, and Bangalore. This is driving the Indian government to implement strong measures including shifting to a cleaner version of fuel as quickly as possible. In November 2017, India's Ministry of Petroleum announced that it was bringing forward the compliance deadline for BS-VI emission standards for the National Capital Region (NCR) by two years to 1 April 2018. The move is also in line with India's commitment under the Paris Agreement to reduce emissions of greenhouse gases. By shifting to BS VI norms, India will inch closer to the highest fuel standards used globally. Following the announcement, the oil companies in the state of Delhi began selling BS-VI emission standard compliant gasoline (petrol) and diesel.

The Indian government also unveiled a draft national auto policy in February 2018 that aims to promote low-emission mobility in the country. The policy aims at adopting a long-term roadmap for emission standards beyond Bharat Stage VI stage and makes it consistent with global standards by 2028. It also envisions the Corporate Average Fuel Economy (CAFE) norms until 2025 and beyond, for improving the average fuel economy of vehicles, and fix incentives or penalties. The policy focuses more on reducing emissions, rather than the technology employed to achieve the reduction. The Indian government has also been considering imposing the GST on the basis of car length and carbon dioxide (CO2) emissions from fiscal year (FY) 2019, instead of engine capacity and length. Meanwhile, the Indian government is also pushing for electric vehicles (EVs) in the country under its plan to achieve full vehicle electrification in the country by 2032. However, there is a huge challenge associated with the availability of charging infrastructure and skilled manpower for the maintenance of EVs.

Posted 25 July 2018 by Nitin Budhiraja, Senior Analyst II

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