Fuel economy standards: a non-starter

Just when the country was hoping for a final decision on fuel economy standards for passenger cars it has been delayed again. After four years of wrangling the concerned ministries of power and transport are still indecisive as the car industry continues to put pressure for weak standards. The buck has been passed on to the Prime Ministers’ Office for the final go.

The official deliberation on the standards has remained under wraps for a long time. Only in the face of public pressure the two ministries–Ministry of Power and the Ministry of Road Transport and Highways–opened the proposal for public consultation. But the consultation paper ‘Passenger Car Fuel Economy Labeling and Standards’ that was released by the Bureau of Energy Efficiency for public comments late last year drew serious criticism for being too little, too late. There are reports of a revised document with slightly improved targets. But it is still under wraps.

Delay in announcing and implementing the fuel economy standards for 2015 and 2020 can seriously jeopardise energy security and climate mitigation plans especially given the unprecedented growth in car sales. Crude oil prices are peaking again and this can hurt India tremendously as it imports nearly 80 per cent of its crude oil needs. According to the International Energy Agency cars will be one of the primary drivers of energy demand in the transport sector in the coming decades.

The Bureau of Energy Efficiency (BEE) under the Ministry of Power is setting the standards and the Ministry of Road Transport and Highways is responsible for implementing them.  The new standards are being set as corporate average fuel consumption (CAFC) standards. These will be set in terms of fleet average carbon-dioxide emissions target that will be sales weighted for all the new cars sold in a year. CO2 emissions depend directly on the amount of fuel burnt. The targets will be set for 2015 and 2020.

What’s wrong?

The original proposal if not changed will turn the clock back. In 2010, the Indian car industry had already achieved average fleet fuel consumption levels of 6 litre per 100 km. But the application of the proposed standards to available data for car sales and fuel economy show that the proposed standards are asking the car industry to come down to only 5.73 litre per 100 km in 2015, and to 5.14 litre per 100 km in 2020. This means less than 1 per cent reduction per year until 2015 and 2.2 per cent reduction thereafter until 2020.

The industry has already achieved a better rate of improvement than those proposed by the standards. The assessments made by New Delhi based non-profit, Centre for Science and Environment, show that between 2007 and 2010, the car industry has already improved its average fuel economy from 6.53 litre per 100 km to 6 litre per 100 km in 2010 – an improvement of 2.8 per cent a year. Then why are the proposed standards asking the car industry to meet a target of only 0.8 per cent improvement between 2010 and 2015 and 2.2 per cent between 2015 and 2020. The government has clearly capitulated under pressure from the car industry to create a lax margin for bigger and more inefficient cars.

Some carmakers will get away by not doing anything at all for the first few years. Estimates from available data show that some of the car majors in India like Tata Motors and Hyundai are well within the proposed standard line and will not have to do anything for five years. Over 10 years, they will have to achieve approximately only 1 per cent improvement.  Maruti Udyog Ltd will have to improve by about 2 per cent over 10 years.

The standards will barely allow any fuel savings. The draft proposal has stated that if nothing is done about regulating fuel economy, car fuel consumption will increase from 9 million metric tonne in 2010 to 25 million metric tonne in 2020. Yet India’s own standards are so weak that fuel savings will be negligible–only 3 million metric tonne by 2020: just 12 per cent savings. But if the car industry is made to achieve a minimum of 2 per cent improvement a year, the car fuel consumption can be halved by 2020.

Without substantial improvement India will slide behind all major car producing countries by 2020–even behind US and China. India, by an act of policy, is aiming to finish as the worst in the world despite starting with one of the best baselines than most other vehicle producing countries in 2010.

India has already begun with a much better fuel economy baseline than most other vehicle producing countries. But with the proposed targets, India will finish behind all of them in 2020. India will show up very poorly in the ongoing international climate negotiations if its fuel economy target worsens than that of the US and China despite starting at a level better than them today. This will make a mockery of the National Climate Action Plan of the Prime Minister’s Council.

Report: State of the World 2014: the world is shifting into gear on fuel economy

Report: Policy pathways: improving the fuel economy of road vehicles