BSIV muddle in stimulus package for auto-industry

Why Finance Minister Nirmala Sitharaman's stimulus package for auto sector states the obvious that BSIV vehicles registered before BSVI roll out in April 2020 will live their lives. Why unfounded fears in the market confusing clean vehicle pathways?

By Anumita Roychowdhury
Published: Saturday 24 August 2019
Finance Minister Nirmala Sitharaman's stimulus package for auto sector states the obvious that BSIV vehicles registered before BSVI roll out in April 2020 will live their lives. Photo: Getty Images

Finance Minister Nirmala Sitharaman announced a slew of measures on August 23, 2019 to thaw auto markets hit by one of the worst slowdown in 20 years: The Union government will remove its own ban on purchase of new vehicles, announce a scrappage policy soon, postpone revision of registration fees on vehicles to 2020 and allow additional depreciation of 15 per cent on inventory. But there is also a puzzle in the package.

While the larger package is well understood, it is puzzling to hear the Finance Minister stating the obvious: That Bharat Stage IV (BSIV) compliant vehicles (current emissions standards in India) purchased till March 31, 2020, — just before the BSVI roll out, would be allowed to remain operational for the full period of registration. How can this be a new decision for a stimulus package when this is already the law of the land and has never been contested?

There is neither a rule from the government nor any ruling from any court to say that vehicles to be purchased till March 31, 2020 will be taken off the road the moment BSVI rolls out in April 2020. Moving new vehicles to new emissions standards does not work that way. On-road vehicles continue to ply for the pre-defined registration period.  

The only key ruling that has bearing on the date of the makeover from BSIV to BSVI models is the Supreme Court direction of March 29, 2017 and October 24, 2018 — any model that will be sold from April 1, 2020, will have to meet BSVI standards.

This eliminates the time gap between registration of new models meeting BSVI and the makeover of existing models to meet BSVI after March 2020. All models to be sold April 2020 onwards will have to meet BSVI standards.

This has no implications for vehicles that are already plying on the road or will be purchased before March 31, 2010.

Therefore, this statement from the finance minister to uplift flagging consumer sentiments is a puzzle. Unless we have missed something or there has been misleading hearsay in the market.

That is worrying. Too many statements regarding the imminent ban on internal combustion engines and 100 per cent makeover to electric vehicles are flying without policy and legal backup under the existing relevant legislations.

This needs to be addressed as often such posturing, which fan miscommunication, can harm the roadmap needed for clean vehicle pathways.

Ground truthing

Currently, under the laws, all vehicles sold and registered have a life according to the Central Motor Vehicle Act and Rules. In most parts of India, on-road personal vehicles require to go for roadworthiness and fitness tests after 15 years for re-registration. Commercial vehicles have to undergo annual fitness tests until the end of life. Trucks older than 15 year often have restricted movement.

The exceptions are those cities where age caps have been imposed — where the local air pollution situation and public health risks from old and polluting vehicles have required fixing of vehicle age. Such zones can also be expanded.  

In the absence of a national policy, such measures locally become a proxy for scrappage and stimulus. In Delhi, under court orders, the age of diesel vehicles have been fixed at 10 years and that of petrol vehicles 15 years. Similarly, the Calcutta High Court has fixed the age of commercial vehicles at 15 years. Some cities regulate the age of their public transport buses.

Such local action will now require a national framework.  

Take away

The bigger takeaway from the Finance Minister’s stimulus package for the auto industry is that the country needs a composite scrappage policy and end-of-life regulation. But this should not be a knee-jerk and ill-designed programme.

In fact, the idea of scrappage was not popular in India so far, simply because India was operating at a low level of emissions standards. Therefore, there was not much potential emissions gain from replacement.

But with the introduction of BSVI emissions standards in April 2020, the potential of emissions reduction of replacing Euro 0 to Euro II vehicles can be significant especially in the case of commercial vehicles – buses and trucks – that are high-mileage vehicles (being driven long distances). BSVI is 80-90 per cent cleaner than the current the current BSIV vehicles and therefore significantly cleaner than the very old ones.

Scrappage is not only a stimulus package for the auto industry but also a strategic pollution control measure. The government has to recognise that once the scrappage policy is underway there will enormous waste and clunker.

Currently, the selective enforcement of age cap in a few cities is leading to mass migration of old and derelict vehicles to other parts of India. In fact, under some of the directions of the National Green Tribunal, state governments are even identifying and notifying cleaner and less polluted environs where these dumped vehicles can be sold. Clunker are getting shifted to someone else’s backyard.

It is ironical that the areas that have succeeded in keeping relatively clean environs have to accept polluting vehicles from other areas. Instead they should have been incentivised to build a stake in their cleaner baseline and protect it.

Therefore, a strategic national scrappage policy along with end-of-life regulation is needed to build infrastructure and facilities across the country for proper and safe disposal and dismantling of vehicles.

Already we have faced serious backlash against informal recycling systems and scrapyards of dumped vehicles as witnessed in Mayapuri in Delhi recently. Instead of integrating these informal systems with organised scrapping facilities for environment-friendly disposal, or guiding them with proper siting policy with adequate pollution control measures, these are shut down to mushroom somewhere else without control.

Each city will have to deal with its own clunker waste. This means that the Centre, in addition to defining the rule for scrappage and end-of-life regulations, will also have to ensure state governments are creating adequate infrastructure for safe scrappage without pushing pollution beyond their boundaries.

The immediacy of this stimulus package may fast pace the scrappage policy. But this is fundamentally an environmental policy first and then a stimulus package. This will have to be crafted well.   

The other takeaway of this confusion — Instead of touting only ambition of 100 per cent electric vehicles and phase down of internal combustion engines, work immediately on:

The legal roadmap for more certain and reliable zero-emission mandate with a legal back up,

  • Milestones with timeline for segment-wise phased production and fleet transformation
  • Performance linked fiscal incentives
  • Non-fiscal measures at the city level
  • Well defined pathway for charging infrastructure and battery management at the city level

Clearly, this muddle on BSIV registration seems like a reaction to unfounded fears in the market triggered by miscommunication on BSIV and BSVI registration. This just proves once again why it is important to move beyond soundbites to hard policies backed by game-changing implementation.

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