Centre drove auto firms to diesel, now blames them
The National Green Tribunal (NGT) banning the registration of all diesel vehicles in Delhi is the most blatant example of how thoughtless government policy can play havoc with the finances of individuals and hapless corporates—though the ban is an interim one, till the next hearing, it has asked the government to examine whether a permanent ban is a good idea since the odd-day-odd-car solution won’t achieve much. On the face of things, the ban is logical since diesel vehicles are amongst the biggest polluters in Delhi. Indeed, the current fuel norms allow a diesel car to emit 7.5 times the particulate matter a petrol car can, and 3 times more NOx. So, while more than a fifth of Delhi’s particulate pollution comes from personal vehicles, diesel’s share is overwhelming. Banning the registration of diesel vehicles will help contain the problem, assuming those buying diesel cars don’t simply get them registered in neighbouring areas. What is shameful, though, is that it was the central government’s policy on diesel that drove auto-makers towards diesel even though, at that point in time, too, there were enough environmental warnings on the impact of diesel.
Maruti’s is the most evocative story in this context. In 2001, when the Delhi-Gurgaon inter-city traffic picked up thanks to the call-centre boom, Maruti decided to make a van that could be used to pick-up and drop call-centre employees from across the city. Suzuki came up with the Versa, a van that was a lot more fuel efficient than the diesel-fired Tata Sumos that did the job. Maruti thought it was on to a winner, and even had the Amitabh-Abhishek duo advertise for the Versa. The van was a complete failure because Maruti believed what the government said. In 2000, diesel prices were roughly half those of petrol, so in order to beat the diesel Sumo, the Versa had to have more than double the fuel economy, which it did not. But, what made Maruti bet on the petrol Versa was a central government commitment to phase out oil subsidies by 2002—fully on diesel, and partially on kerosene and LPG. This promise was never kept, and with diesel prices remaining at 65-70% of petrol prices in the 2000s, customers demanded more diesel cars. Which is why, from R12,600 crore in FY06, the government gave out diesel subsidies of R52,300 crore in FY09 and this rose to a whopping R92,000 crore in FY13—the choice for Maruti and other auto majors was to fall in line with government policy, or fall behind. By 2007, Maruti fell in line, and made its first big foray into diesel with the Swift diesel. It has never looked back and, today, around 30% of production is of diesel engines—around R3,000 crore has been invested in setting up two new diesel engine plants, and Suzuki is also doing R&D on new diesel engines.
Should the ban finally happen, passenger car companies can tentatively lose 3-4% of sales from the Delhi market, but were the ban to spread to other cities with a pollution problem, the impact could be far worse; and we are not even talking about trucks yet. Who is going to pay for the losses the companies will sustain when the impact of the NGT order gets felt? And how is a company to finalise its plans when the government feels it is okay to keep changing policy whenever it feels like. And, if diesel taxes are to be raised, a logical thing to do to curb usage, who is to compensate customers who paid more for diesel cars in the knowledge they would make up the difference in a few years of driving?