Diesel’s fortune looks bleak until Euro 6 emission norms are adopted

The uncertainty surrounding the fate of diesel — an environment polluting yet preferred fuel to power big sized cars — would continue to remain in limbo till India catches up fast with the globally accepted emission norms, the Euro 6. The ongoing judiciary-mandated ban on the sale of diesel passenger vehicles, above 2,000 cc engines, in the national capital region (NCR) has already started impacting the sales of big diesel cars in the region which is considered one of the largest markets for such vehicles in India.

“Such a ban could have been avoided had India adopted the Euro 6 norms well in time,” says Deepesh Rathore, director, Emerging Markets Automotive Advisors. “I am concerned about the environment but I also have a bigger concern about the way a policy is drafted in India and the growing number of (green) activists impacting those policies.”

Lack of clarity in the fuel as well as the emission policy had perturbed car manufacturers to the extent of impacting their long-term investment decisions. Auto mavens feel that such uncertainty would impact millions of dollars of investment that India’s auto industry badly needs. Rathore pins high hopes on the present government to speed up India’s upgradation to Euro 6. Under the Euro 6 regime, diesel is processed to a much higher grade to cater to the less polluting modern engines. At present, India follows Euro 4 emission norms which have become outdated by at least a decade; a reason diesel is seen as a disgraced fuel solely responsible for causing havoc with the environment. But upgradation to Euro 6, an event unlikely to happen before 2019, would also have its own cost that buyers will have to pay for.

The Supreme Court also wants an environment cess (being worked out) to be imposed on high-powered diesel cars as a precondition to lift the ban on the sale of such vehicles in NCR. Such a cess would impact the decision to buy high powered diesel vehicles, the most sought-after cars by the upwardly mobile middle class. So, the sales of diesel cars might take a beating but “its fortune would smile back after India adopts and implements the Euro 6,” says Sudarshan Sreenivas, an auto expert with India Ratings & Research.

In the meantime, car manufacturers are trying to grapple with this uncertainty by making a sub-2,000 cc diesel engine. Mahindra & Mahindra, Tata’s, BMW and Audi have decided to move on with this uncertainty by making a sub 2,000 cc diesel engine to power their vehicles. But global manufacturers like Mercedes are being badly hit as its smallest engine is of 2,187 cc.