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Cess rider for large diesel cars in Delhi

SC lifts ban after 8 months, imposes 1% levy; carmakers cheer

Mj Antony Ajay Modi & Swaraj Baggonkar  |  New Delhi/ Mumbai 

The Supreme Court on Friday lifted the eight-month-old ban on registration of diesel vehicles with engine capacity of 2,000 cc and above in the national capital region (NCR), and imposed a one per cent green cess on ex-showroom prices of such vehicles. For carmakers, the relief came just in time ahead of the festival season. The money collected via green cess, or "environment compensatory charge", will be deposited in an account of the Central Pollution Control Board to be opened in a public sector bank. The court will consider later how the fund should be utilised to reduce pollution in Delhi and its suburbs. The December order was passed after a public interest litigation (PIL) sought stringent action to control rising pollution levels in the national capital. The central government argued in the court that imposition of taxes comes under the realm of Parliament. Solicitor General Ranjit Kumar moved an application on behalf of the government, which the court is likely to consider in the next hearing. Environmentalists represented by senior counsel Harish Salve submitted that one per cent was too little for such luxury vehicles and a rate higher than that should be considered. The court agreed to consider his request also, but did not fix a date for the next hearing. However, the court clarified that there would be no retrospective change in the rate of the green cess. The one per cent green cess has come as a relief for the automobile companies as there were speculations of a much higher levy. "Following the court suggestion, we as a voluntary interim measure, offered to pay 1 per cent of the ex-showroom price of the vehicles towards anticipated Environment Compensation Charge as a deposit, and not on the premise that our vehicles are polluting the environment," said a statement from Mercedes Benz. The industry has welcomed the decision. "We are very relieved with the decision of the Supreme Court today. Hope this decision will put all controversy surrounding diesel fuel behind us and we will be able to focus on the more important task of making our vehicles compliant with BS VI norms by April 2020," said Pawan Goenka, executive director at M&M. The ban, imposed on December 16 last year, impacted a number of players and their dealers, some of whom also saw employee exits. Toyota is estimated to have lost sales of 8,500 units of Innova and Fortuner due to the ban.

Utility vehicle major Mahindra & Mahindra's popular products such as XUV500 and Scorpio were also hit. M&M's launch of 1,990 cc diesel engine (that was being developed for the global market) helped the company sail through the legal hurdle. Mercedes, the largest luxury car player in the Indian market, reported its first sales decline during H1 of 2016 after three consecutive growth years. It has also scaled up petrol offerings for most of its models. Shekhar Viswanathan, vice-chairman and director, Toyota Kirloskar, said, "We want the public to know that we are not here to pollute the environment. This is an interim relief and this is what we had been asking for several months. Every fuel has its own set of drawbacks and this is what needs to be realised by everyone and only then can we claim that the real battle has been won. We have no choice but to accept the cess." The impact of the ban, however, was not limited to companies manufacturing diesel vehicles of the specified engine capacity. It created challenges for vehicles below 2,000 cc because buyers turned apprehensive about the fate of diesel cars across the country. Regulatory uncertainties such as the ban and a narrowing price gap between petrol and diesel have driven buyers away from diesel cars and forced manufacturers to offer higher discounts on such variants. According to Society of Indian Automobile Manufactures (Siam) data, the share of diesel variants in new cars fell to 27 per cent during April-June quarter, compared with 52 per cent four years ago. "It is pleasing to get clarity, particularly for the customers. The lack of clarity has already had a severe negative impact with the worst affected being people working at dealerships. There have already been job losses due to the impact this ban has had on business in the Delhi NCR," said Joe King, head of Audi India. WHEN COURT TURNED INTO GREEN CRUSADER Dec 2015: NGT bans registration of diesel vehicles in Delhi through an interim order > SC bans registration of diesel vehicles with engine capacity of 2,000cc and above in NCR. Order primarily impacts M&M, Toyota and Mercedes. > NGT order lapses Jan 2016: M&M launches 1,990cc diesel engines for SUVs July: SC reserves order in petition against ban on registration of diesel vehicles Aug: Toyota launches petrol version of Innova, resumes sale of multi-utility vehicles in NCR Aug 12: SC lifts ban, asks companies to pay 1 per cent green cess on 2,000cc diesel vehicles Carmakers that lost business Toyota: Loss in sales of 8,500 units of Innova and Fortuner during the ban Mercedes: Sales growth flat in first half of 2016 M&M: After being impacted for a month, the company launched 1,990cc engines in NCR market

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First Published: Sat, August 13 2016. 00:59 IST
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