The National Green Tribunal banning the registration of diesel vehicles in Delhi is the most blatant example of how thoughtless government policy can play havoc with the finances of both individuals as well as hapless corporates. On the face of things, the ban is the most logical thing to do since the biggest pollutants in Delhi are diesel vehicles. Indeed, even while being compliant with the central laws on pollution, the current norms allow a diesel car to emit 7.5 times the particulate matter a petrol car can, and 3 times more NOx so, while more than a fifth of Delhi’s particulate pollution comes from personal vehicles, diesel’s share in this is overwhelming. Banning the registration of diesel vehicles will help contain the problem, assuming of course that those wishing to buy diesel cars don’t simply get them registered in neighbouring areas.
That, however, is the least sinister part of the story. What is shameful is that it was the government policy on diesel that drove auto makers, and customers, towards diesel even though, even at that point in time, there were enough environmental warnings on the impact of diesel – one well-known NGO got sued by a leading auto-maker when a newspaper published a picture of that firm’s diesel vehicle in an article by the NGO’s head on the health hazards of diesel vehicles.
Maruti Suzuki’s is the most evocative story in this context. In 2001, when the Delhi-Gurgaon inter-city traffic really picked up thanks to the call-centre boom, Jagdish Khattar used to head Maruti Suzuki and decided to make a special vehicle to cater to this traffic, a van that could be used to pick-up and drop call centre employees. Maruti Suzuki’s Japanese parent came up with the Versa, a van that was a lot more fuel efficient than the diesel-fired Tata Sumos that did the job. Khattar thought he was on to a winner, and had the Amitabh-Abhishek duo advertise for his vehicle.
The car was a complete failure because Khattar was foolish enough to believe what the government said. In 2000, when the Delhi-Gurgoan traffic began to really pick up, diesel prices were roughly half those of petrol, so in order to beat the diesel Sumo, the Versa had to have more than double the fuel economy, which it did not. But, what made Khattar bet on the petrol Versa was a government of India commitment to phase out petroleum subsidies by 2002.
This promise was never kept, and with diesel prices remaining at 55-60% of petrol prices, customers kept demanding more diesel cars. Which is why, from Rs 12,650 crore in FY06, the government was giving out subsidies of Rs 52,300 crore in FY09 and this rose to a whopping Rs 62,900 crore in FY14 – Maruti Suzuki’s choice at that point was to fall in line with what government policy was indicating, or fall behind.
By 2007, Khattar fell in line and Maruti Suzuki made its first big foray into diesel with the Swift diesel. It has never looked back since and, today, around 30% of production is of diesel engines – around Rs 3,000 crore has been invested in setting up two new diesel engine plants, and Suzuki is also doing R&D on new diesel engines. Who is going to pay for the losses the companies will sustain when the impact of the NGT order gets felt? And how is a company to make its policies when the government feels it is okay to keep changing policy whenever it feels like. And who is going to compensate citizens who, having bought expensive cars on the basis of government policy, are not free to drive them every day?