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Customer LoginsIndian Supreme Court lifts conditional ban on diesel vehicles in capital after levying environmental tax
The 1% tax is applicable to vehicles powered by engines bigger than 2000cc, but may be extended to all diesel passenger vehicles in future.
IHS Automotive perspective
- Significance: India's Supreme Court has lifted the conditional ban on registration of diesel vehicles in the national capital region (NCR), replacing it with a 1% environment compensation charge.
- Implications: The court has reserved its judgment on the suggestion that the environmental tax be applied to all diesel passenger vehicles, irrespective of engine displacement.
- Outlook: Lifting the ban offers a respite to the industry; however, it may have set a dangerous precedence of winning short-term gains at the cost of long-term damages.
In a major relief to automakers, India's Supreme Court has lifted the conditional ban on registration of diesel vehicles in the national capital region (NCR). The court has allowed the registration of diesel vehicles with engine capacity of 2000cc and more in the region if they pay a 1% environment compensation charge, reported Indo Asian News Service (IANS). "Let (the environment protection charge of) 1% come. Pollution is now under control," a bench comprising Chief Justice TS Thakur and Justices AK Sikri and R Banumathi said in their order on Friday.
The additional tax is payable on the ex-showroom price of the vehicles and is required to be deposited with the Central Pollution Control Board (CPCB). In its judgment, the three-member bench of the apex court said that the board will open a separate account in which the car manufacturers or their dealers will be required to deposit the charge.
The court has, however, reserved its judgment on the suggestion that the court should extend the environmental tax to all diesel passenger vehicles, regardless of engine displacement. The charge may also be later extended to vehicles with diesel engines under 2000cc, the court said.
Despite the uncertainty regarding the additional tax on vehicles powered by smaller engines, the automotive industry has welcomed the court's ruling. "We are very relieved with the decision of the Honourable Supreme Court today. Hope this decision will put all controversy surrounding diesel fuel behind us and we will be able to focus on the more important task of making our vehicles compliant with BS-VI norms by April 2020," said Pawan Goenka, executive director of Mahindra and Mahindra (M&M) in a statement.
"We at Toyota Kirloskar Motor (TKM) welcome the Honorable Supreme Court's decision on lifting the ban on registration of diesel vehicles over 2000cc in NCR Delhi," said Shekhar Viswanthan, vice-chairman at TKM.
Outlook and implications
In its controversial decision in December 2015, the Supreme Court directed authorities in the region to stop the registration of diesel vehicles powered by engines bigger than 2000cc in its bid to control rising air pollution in the capital city which was declared the world's most polluted city by the World Health Organization (WHO) in 2014. Although the conditional ban was originally meant for only three months, it was extended in subsequent hearings.
As a result of the arbitrary decision, sales of certain automakers were crippled in the region. Important among the automakers affected by the judgment were Mercedes-Benz, M&M, Toyota, and Tata Motors. Apart from directly affecting sales of diesel vehicles in the region, the judgment indirectly facilitated a fundamental shift in consumer preferences away from diesel fuel not just in the region but across the nation. As a result, several automakers have announced plans of equipping their entire product line up with petrol (gasoline) engines while some have decided to defer their investments until more clarity emerges on the matter.
The latest ruling comes after automakers approached the court, making clear of their willingness to pay an environmental tax. Automakers have been quick to point out that the desperate attempt is purely to protect their business and not on the premise that their vehicles are polluting the environment. Studies have shown that vehicles powered by gasoline (petrol) and compressed natural gas (CNG) are also responsible for vehicular pollution in the region. As such, lifting of the ban offers a respite to the industry; however, it may have set a dangerous precedence of winning short-term gains at the cost of long-term damages. Diesel is the fuel of choice for some vehicle body styles such as sport utility vehicles (SUVs) and multi-purpose vehicles (MPVs) and the latest tax is likely to make these vehicles even more costly after levies earlier this year targeted these vehicles.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.