Transport minister Nitin Gadkari wants auto firms to make cars that run on electricity, biodiesel, ethanol and CNG or risk being overtaken by inevitable policy change
New Delhi: Indian auto firms were warned by the government on Thursday to switch to production of vehicles that run on non-polluting alternative fuels or risk being overtaken by inevitable policy change.
Automakers have to move to vehicles that run on electricity, biodiesel, ethanol and compressed natural gas “whether they like it or not", transport minister Nitin Gadkari said.
“And I am not going to ask you. I will bulldoze it (through)," Gadkari told auto industry executives at an annual convention organised by the Society of Indian Automobile Manufacturers (Siam). “The government has a crystal-clear policy to reduce imports (of crude) and curb pollution."
Gadkari’s speech served notice on automakers that the future of the industry lies in environment-friendly alternatives to petrol and diesel, which will require a radical shift in the strategies of vehicle manufacturers as well as significant technology investments.
“We are going to go after diesel vehicles heavily. So don’t complain later and say you have unsold inventory if they are banned," Gadkari warned.
India’s automobile industry, which sold 3.04 million passenger vehicles in the year to March 2017, has been hit hard by policy changes and court decisions pertaining to emission norms in response to the worsening air quality in Indian cities.
It faced an eight-month ban in 2015-16 on large diesel vehicles in the National Capital Region centred on Delhi and was ordered to stop sales of its inventory of Bharat Stage-III (BS-III) vehicles after BS-IV norms took effect in April.
In January, the government decided that India will move up to the toughest emission standards of BS-VI from BS-IV by 2020, two years early and skipping an intermediate level, a decision that will make cars, sports utility vehicles (SUVs), trucks and buses more expensive.
Auto firms, parts makers, and oil refiners will end up spending anywhere between Rs70,000 crore and Rs90,000 crore on the change, Mint reported on 6 January.
Last week, an ordinance was promulgated to enable an increase in the goods and services tax (GST) cess on motor vehicles, including medium-sized cars, large cars and SUVs, from 15% to 25%.
“The auto industry is about large investments and long lead times for product development," said Rakesh Batra, partner and leader, advisory services, for the automobile industry and transportation sector at consulting firm EY.
“To be able to invest in future, disruptive technologies, the industry should be able to sustain itself. By making too many changes to policy, the earlier investment gets redundant and there’s no way you can recover it," he added.
Unlike some other sectors such as aviation, oil and gas, telecom and power, India’s auto sector does not have a dedicated ministry for formulation of policies and regulations.
India’s efforts to switch to environment-friendly fuels is part of its commitment under the Paris accord on climate change to reduce carbon emissions relative to its gross domestic product by 33-35% from 2005 levels by 2030. India also pledged that by 2030, 40% of the country’s electricity would come from non-fossil fuel-based sources such as wind and solar power.
In the auto sector alone, the country wants to move to an all-electric fleet by 2030.
Vinod Dasari, the outgoing president of Siam and managing director of Ashok Leyland Ltd, said the auto industry is “not asking for any sops and incentives, we are just asking for a policy roadmap".
“One nation, one government and one regulation. Is that too much to ask?" Dasari said.
Critics say the Indian auto industry has tended to react to policy changes instead of anticipating them and moving to adopt new technologies. Automobile industry executives counter this by saying that policy changes have been too rapid.
“One of the things that industry has been saying is that things are changing too quickly. Whatever we are being asked to do, there is lead time involved and we should not change things very frequently. Any sudden change has an impact," said Pawan Goenka, managing director, Mahindra and Mahindra Ltd.