No al­ter­na­tive to green fuel shift: Gad­kari to auto firms

Union trans­port min­is­ter warns auto man­u­fac­tur­ers that gov­ern­ment will ‘go af­ter diesel ve­hi­cles heav­ily’

Mint Asia ST - - Inside - BSY HALLY S ETH M OHILE & A MRIT R AJ

In­dian auto mak­ers were warned by the gov­ern­ment on Thurs­day, 7 Septem­ber, to switch to pro­duc­tion of ve­hi­cles that run on non-pol­lut­ing al­ter­na­tive fu­els or risk be­ing over­taken by in­evitable pol­icy change.

Auto mak­ers 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,” he said.

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. We should move to­wards al­ter­na­tive fuel... I am go­ing to do this, whether you like it or not. And I am not go­ing to ask you. I will bull­doze it... The gov­ern­ment has a crys­tal-clear pol­icy to re­duce im­ports and curb pol­lu­tion... We are in the process of (pre­par­ing) a cabi­net note where we are go­ing to plan charg­ing sta­tions.

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 com­pa­nies, 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 en­vi­ron­ment­friendly 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 non­fos­sil 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 road map”.

“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.

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