Maruti loses edge as govt scraps small car concession in new fuel-emission norms: Why did the govt tweak the rules?

Maruti Suzuki is likely to bear the brunt after the central government scrapped a planned concession for small cars under the upcoming fuel-efficiency rules. A draft released in September last year had proposed leniency for petrol cars weighing 909 kg (2,004 lb) or less, a move that was widely seen as favouring the carmaker.

The company dominates India's small-car segment, controlling nearly 95% of the market, prompting rival automakers, including Tata Motors and Mahindra & Mahindra, to flag the proposal as giving it an unfair competitive advantage, news agency Reuters reported.

What do the new rules aim to do?

Following the industry pushback, the Power Ministry has now dropped that exemption and tightened other parameters, increasing pressure on all automakers to ramp up electric and hybrid car sales, according to the latest 41-page draft reviewed by Reuters.

The new rules limit over-compensation for vehicle weight, aim to level the field between light and heavy fleet manufacturers, and are designed to deliver real-world efficiency gains, the document said.

Additionally, they have also introduced "a substantially steeper reduction pathway" for emissions, the agency report added.

The new rules will apply from April 2027 for a period of five years and are central to automakers' product and powertrain investment plans. However, it remains unclear when the rules will be finalised.

Why the proposal was flagged?

Transport is a major driver of petroleum imports and carbon emissions, as it accounts for roughly 12% of India's energy use. Meanwhile, Passenger vehicles make up nearly 90% of transport-related emissions, the document says.

Corporate Average Fuel Efficiency norms set limits on how much carbon dioxide carmakers are allowed to emit on average across all passenger vehicles they sell, as long as the cars weigh less than 3,500 kg. In simple terms, they ensure that companies do not sell too many highly polluting cars.

These rules are updated every five years, and are meant to push automakers make cleaner vehicles, such as electric cars, CNG models, and flex-fuel vehicles.

The September draft would have allowed fuel-consumption targets to rise faster with vehicle weight, easing compliance for manufacturers of heavier cars such as Mahindra, Tata and Volkswagen, while tightening demands on lighter-fleet players such as Maruti. This imbalance prompted the exemption, the agency report said.

The revised plan reduces the extent to which heavier vehicles gain more relaxed targets. "Manufacturers with heavier fleets ... are required to achieve stronger intrinsic efficiency improvements," the document said.

Under the new rules, companies will earn credit if they sell more EVs and plug-in hybrids, which helps offset higher emissions from petrol or diesel models. Carmakers will also be allowed to “pool” or combine their efficiency performance with other companies to meet the targets.

Non-compliance of these rules will lead to penalties of up to $550 per car, which will be bore by the company.