To clear air, Supreme Court bans sales of big diesel cars in Delhi

A worker repairs a diesel pump machine at a fuel station in Kolkata January 18, 2013.

REUTERS/RUPAK DE CHOWDHURI/FILES

 BY ADITI SHAH-Thu Dec 17, 2015

The Supreme Court has ordered a temporary ban on the sale of large diesel cars in New Delhi to combat toxic smog in the city, prompting concern in the auto sector as some carmakers say they may reconsider investment plans in the country.

According to an order passed on Wednesday, the registration of sport-utility vehicles and other diesel cars with an engine capacity of 2,000 cc or more is banned in Delhi and the surrounding region with immediate effect until March 31.

Delhi's crackdown on diesel cars has unsettled the industry, its salesmen and investors, who warn the ban and uncertainty around it could derail a tentative recovery in Indian sales and leave dealers with forecourts packed with unsold cars.

Environmental campaigners and the lawyer who brought the case to the Supreme Court, however, say they want to see the order extended beyond the capital to other smog-choked cities.

Daimler AG's Mercedes-Benz, for whom the Delhi region represents almost a quarter of sales in the country, told Reuters the diesel ban and the uncertainty around it would "severely impact" growth plans and future investment in India.

"We also have to consider the loss of jobs that this will result (in) at the dealerships, at the vendors producing diesel engines," a spokesman said in an emailed statement, adding its own workers would be affected.

TRUCK CHARGE DOUBLED

The court - which said the order would not hit India's "common man" - stopped short of banning the smaller cars that clog India's roads. But it did also prohibit trucks from passing through the city to reach other states and banned all trucks over 10 years old from the capital.

An existing charge imposed on trucks making deliveries to Delhi itself was doubled to up to 2,600 rupees ($39).

Other measures include a demand for all taxis in Delhi, mainly those operated by Uber and local rival Ola, to replace diesel with natural gas, as well as a broad, immediate ban on burning solid waste.

In January, the judges will also consider an application to levy a green tax on all diesel cars sold in the country.

Environmentalists have cheered Wednesday's moves, but analysts questioned the detail of the ban.

"The (higher truck) levy will just go back to whoever is hiring the trucks. So eventually the consumer ends up paying the levy and inhaling the gas fumes," said Deepesh Rathore, director at consultant Emerging Markets Automotive Advisors.

CLEANING UP

India's National Green Tribunal, an environmental court, last week ordered a ban on the registration of all diesel vehicles for nearly four weeks to help clean up the air in Delhi, one of the world's most polluted cities.

That triggered a share price fall among automakers which have invested heavily in diesel technology in India. The drop steepened after the Supreme Court's order.

Mahindra & Mahindra, India's top utility-vehicle maker, was one of the biggest losers with shares down 5.5 percent. It said the ban would affect roughly 2 percent of its total monthly sales.

Rivals such as Tata Motors and Toyota Motor Corp, the world's top-selling carmaker, also have popular large cars. Greater Delhi contributes 8 percent of Toyota's sales and 80 percent of vehicles sold in this region are diesel.

India's auto industry body called for a comprehensive plan, which should include a policy to remove and scrap old vehicles.

(Additional reporting by Sankalp Phartiyal; Writing by Clara Ferreira Marques; Editing by Mark Potter and Keith Weir)