Delhi’s divorce with diesel stoking anxiety

May 9 is likely be a day of high anxiety levels for the automobile industry. This is when the Supreme Court will review the ban it had imposed on registration of 2000cc plus diesel cars in Delhi four months ago.

The growing demonisation of diesel baffles carmakers even while they continue to cry hoarse that it is the best bet for clean air. It is no secret that diesel has been the for some years now especially during the times global crude prices were spinning out of control and it still enjoyed a generous subsidy.

There are no two ways about the fact that it was vulgar at that point in time to have expensive, gas-guzzling SUVs making the most of cheap diesel especially when the oil companies were strapped for cash. However, this situation is now passé with deregulation in place and the subsidy element knocked off in the process.

Yet, to a section of the green lobby, diesel is still the lethal alternative even while the automobile industry has been constantly maintaining that it is clearly the cleaner option as evident in Europe which is very stringent about emissions. Diesel’s fall from grace in recent times is not only bewildering but has wreaked havoc in Delhi’s auto ecosystem. Since the ban in mid-December, dealers have had their backs to the wall as their business has taken a huge nosedive. The worst affected companies – Toyota, Mercedes and Mahindra – have had to recast their business plans almost overnight. While M&M is ready with its sub-2 litre diesel engines, the two multinationals are wondering how to convince headquarters that investments in India make sense.

Difficult times

Diesel has also been the bane of over 50,000 taxis in Delhi which were ordered off the roads from May 1. The Supreme Court made it clear that the only option for the cab segment was compressed natural gas (CNG) which meant that diesel and petrol were taboo. This led to furious protests by drivers over the next couple of days as traffic came to a grinding halt in many parts of Delhi.

Today, call centres which hire these cabs to ferry employees home are clearly a worried lot. Without these lifelines, safety will become the biggest challenge to deal with in a part of the country that is notorious for assaults on women. Realising that the situation was getting out of control, the Centre said it would now appeal to the SC to revoke the ban on non-CNG cabs.

Cleanup time

At one level, the SC is absolutely right in its inference that the air in Delhi is foul and in dire need of a cleanup. Is diesel, therefore, the only cause for this environmental catastrophe that is playing out everyday? Petrol and CNG also emit carbon dioxide and nitrous oxides which are as polluting and as a recent IIT study showed, there are emitting sources other than vehicles which foul up Delhi’s air.

Likewise, as experts aver, it is virtually unviable for diesel cars to switch to CNG since the technology parameters are completely different. Replacing a diesel engine with CNG would also become a very expensive option and way beyond what cabbies can afford. A lot of them are already paying loans on their vehicles and this would end up becoming a double whammy which perhaps puts in context why they protested so vehemently.

India’s automobile industry is on its way to becoming the third largest in the world by the end of this decade. It is also the best investment option for automakers across the world considering that other growth markets like Brazil and Russia are tottering at this point in time. These companies would ideally prefer consistency in policy and sudden jolts like the diesel ban will only dampen sentiment.

Yet, there is no denying the fact that legislation paved the way for Delhi’s massive cleanup act 15 years when CNG was made mandatory.

There were massive supply constraints to deal with and serpentine queues at retail outlets became the order of the day. Even as end users complained bitterly, Delhi soon became the country’s benchmark for clean air. However, the landscape has changed considerably since then and diesel alone cannot be held culpable today.

Looking ahead

As the country gears up for the big leap to Bharat Stage VI emission norms in 2020 (bypassing BS V in the process), the auto industry is naturally concerned about the road ahead.

Past experience with the clean fuel transition has not been very encouraging as in the case of BS IV which will now be available across the country only from April 1, 2017, a delay of over five years.

In the meantime, it makes sense for the Centre to offer generous fiscal sops for alternatives like hybrids in its clean air drive. Likewise, electric vehicles need support in the form of charging infrastructure which could help woo customers.

Beyond emerging the world’s third largest producer of cars in 2020, India needs to articulate workable solutions to meet this objective and ensure that things do not get out of control.

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