India's top court has ordered a temporary ban on the sale of large diesel cars in New Delhi and hiked a levy on trucks entering the city, as the country's highly polluted capital seeks ways to tackle one of its worst-ever bouts of toxic smog.

An order passed by the Supreme Court on Wednesday bans the registration of sport-utility vehicles and other diesel cars with an engine capacity of 2,000 cc or more in Delhi and the surrounding region until March 31.

The court stopped short of banning smaller cars, but did prohibit trucks from transiting through the city to reach other states. An existing charge imposed on trucks making deliveries to Delhi itself was doubled, while all trucks over 10 years old will be banned from the capital.

Other measures in the Supreme Court order with longer-range ambitions include a demand for all taxis in the capital to replace diesel with natural gas, as well as a broad, immediate ban on burning garbage.

India's National Green Tribunal, an environmental court, earlier this week ordered a ban on the registration of all diesel vehicles for nearly four weeks to help clean up the air in Delhi, one of the world's most polluted cities.

The measure unsettled both investors and automakers, who have invested heavily in diesel technology for India, long seen as a promising major auto market.

Shares in automakers have dropped on concerns over the implications of the ban in Delhi, which environmental campaigners would like to see extended in some form to other large Indian cities.

Top utility vehicle maker Mahindra & Mahindra's stock was trading down 4.4 per cent after the ruling on Wednesday morning, while gas stocks rose as investors bet providers would benefit from the crackdown to improve air quality.

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