Why should a rich man travel in a diesel car and pollute the environment? This straightforward question by the Supreme Court has set off alarm bells in the automobile sector. It also turns the searchlight upon the Central government’s faulty policy on fuel pricing which has left automakers high and dry. Recently the apex court banned the registration of high-end diesel guzzling vehicles like SUVs and MUVs with engine capacity of over 2000 cc for an initial period of three months in the tiol capital region. It will also conduct further hearings whether the ban is to be made permanent. Automakers are a deeply worried lot as they have invested thousands of crores in plants churning out luxury diesel vehicles. The run-up to New Year is also the time automakers clear inventories by offering attractive discounts. As for Delhi, it happens to be the country’s biggest market in diesel cars. Nearly a third of the vehicles on Delhi’s streets are running on diesel; about half the new cars newly registered there were diesel operated. Automakers are asking what will happen to the thousands of diesel cars in their showrooms booked just before the Supreme Court ban. When the automobile traders association argued that no city in the world has banned diesel, the apex court countered by asserting that ‘the most polluted city must ban it’. The Chief Justice chided them with the words: “You are businessmen. All you are thinking of is money. You have to make sacrifices. Here, people’s health is involved.” This piquant situation has arisen primarily due to the differential pricing between petrol and diesel. Back in 2002, the NDA government at the Centre promised to phase out fuel subsidies. But though petrol prices were deregulated only in 2010, diesel continued to be heavily subsidised until last year.
From 2011 to 2014, the difference between petrol and diesel prices per litre widened from over Rs 22 to Rs 32. Even as fuel sector experts called for petrol-diesel parity, most automakers began introducing luxury diesel vehicles. These found willing customers among government departments too. While powerful and affluent people began motoring about on diesel artificially kept cheaper by the government, poorer car buyers paid through their nose for petrol linked to intertiol prices. This was clearly unsustaible — but the UPA government, wary of upsetting the farmer and trucker lobbies and stoking price rise, began reducing the diesel subsidy very gradually at only about 50p per month. Though the Modi government deregulated diesel prices in October last year, diesel still continues to be about Rs 14 cheaper than petrol. This difference is due to the higher Central excise duty and State value added tax that consumers have to pay for petrol. Meanwhile, diesel has come to be recognised as more polluting than petrol; according to the NGO ‘Centre for Science and Environment’, a diesel vehicle emits as much as three to five petrol vehicles. The World Health Organization (WHO) has put diesel emission in the same category with tobacco as a Class I carcinogen. The current emission standards allow a diesel car to emit 7.5 times the particulate matter and three times the nitrogen-oxide emitted by a petrol car. Though the diesel lobby is claiming such cars contribute only about 1.86 percent of total pollution, the courts are not buying the argument. With strict curbs on diesel vehicles over 10 years old, a 100 per cent hike in the green cess levied on commercial vehicles entering the capital region, and likely directive to taxi operators to switch over to CNG — the prospects for diesel are growing dimmer. There is also the likelihood that the government may be forced to raise taxes on diesel to make it less attractive. This has important bearings for the Northeast region as well, where the market for luxury diesel cars has been booming over the years.