Diesel Ban: the Effects and Consequences

India received a massive shock when the WHO crowned New Delhi as the most polluted city in the world, with more cities like Patna making it into the top 10. A wake up call for just about everyone, we started doing what we are best at- making policies. The Supreme Court proclaimed the capital city as a ‘gas chamber’ while the New Delhi Government made global headlines with its own Odd Even Scheme.

Amidst all this drama emerged the National Green Tribunal (NGT), a Government subsidiary, which waged a battle against diesel engines. All diesel vehicles older than 10 years were banned in the capital, including the daily running large commercial trucks. The effects were quick to follow as the prices of almost everything increased and the huge beeline of trucks entering/crossing the capital had to be diverted to some alternate route.

Diesel Ban

What affected the passenger and small car business was what followed this decision. The Supreme Court of India, in a major ruling, put a temporary ban on the registration of new diesel vehicles with displacement more than 2000 cc in the National Capital region till the 31st of March, 2016 (only to extend it further after that). This came as a major blow to foreign and indigenous car makers alike. Companies like Mahindra & Mahindra, known primarily for their large butch diesel vehicles were put off business due to the decision, as almost none of their best selling products like the XUV 500 and the Scorpio, fit the bill. Same was the case for the Innova-Fortuner maker Toyota and a host of other automobile manufacturers operating in the country. Luxury car makers with their big V8s and V12s, suddenly lost a major market they had in the capital region.

Toyota Fortuner Diesel White Spinny

Big SUVs like the Toyota Fortuner are directly affected by the ban as they need large diesel engines

A whole lot of drama followed, with the particular decision by the apex court being challenged multiple times by such automakers but the court retaliated asking if their vehicles were emitting oxygen in the environment. Sales of diesel driven vehicles fell by 7% in the months following the decision. With ban and registration worries, there has been a growing distrust amongst the car buyers as more and more people are shifting towards the alternatives. Petrol car sales have increased with a bleak push towards the sales of CNG, electric and hybrid vehicles. There has also been a sharp decline in the price difference between diesel and petrol fuel prices, adding further woes to diesel car market.

The Mahindra Angle

With no respite in sight, Mahindra & Mahindra came up with its own iteration of sub-2000 cc engines for the XUV500 and the Scorpio, while at the same time promoting subcompact SUV alternatives amongst potential customers.

Scorpio and XUV500 Spinny

Mahindra’s existing models, like the Scorpio and the XUV500, are going to be revamped to fit the new regulations

It currently has 3 subcompact SUVs (highest by any company) amongst its offerings, namely the KUV100, the TUV300 and the newly launched NuvoSport. Furthermore, Mahindra owned Reva is the market leader of electric vehicles in India and the e2o is the only viable option for anyone who chooses to go electric. Mahindra has shrewdly adapted to the market trends and is now back on track.

The SIAM report

An industry body Society of Indian Automobile Manufactures (SIAM) believes that there’s no relation between the ban and pollution in Delhi. In its report to the Supreme Court said, it states “… production loss due to the ban of these vehicles in NCR from December 16, 2015 to April 30, 2016 has resulted in 11,000 vehicles, which translates to impact on approximately 5,000 jobs in the industry.” It further added that if the diesel ban had been extended across the country, it would have “lead to a loss of production of one lakh vehicles over the same period and would have impacted 47,000 jobs.”

Environmental Compensation Charge

Amongst efforts to revive the Delhi air, the Supreme Court also ordered to levy Environment Compensation “Green Tax” charge on commercial vehicles entering Delhi, in addition to the already existing toll taxes. This ranges from anywhere between Rs. 700 to Rs. 1300, depending on the type, age and capacity of the vehicle.

Effects

Implementing a rule of such magnitude in the national capital is no child’s play and comes with own set of pros and cons. As already stated in SIAM’s report, the ban has resulted in job losses for around 5000 people working at the factory to showroom levels. Additionally, many old diesels have been made redundant and now maintaining them on roads is more expensive than ever. Numerous cab operators in the city burn in the aftermath of the decision as more than 50,000 cabs were ordered off the roads. While on one side huge protests from the cabbies’ side were seen, commuters also had to suffer.

Uber-OLA logo

Cab providers, Uber and OLA, were adversely affected by the ban. So were the consumers of these services

Cities from adjoining states like Haryana, Punjab, and Uttar Pradesh saw a huge surge in the market for second hand cars from Delhi as Delhiites looked to these adjoining areas for getting the best possible price for their diesel vehicles which can no longer be used in NCR. This kept the level of pollution same as a whole or shall we say just cleaned the air in the National Capital Region and left the adjoining areas under a thicker layer of smog.

It’d be too early to comment on the environmental effects and whether or not the decision works towards the betterment of Delhi’s dilapidated environmental conditions, but certainly there’s a flip side to it and it just can’t be ignored.