DNA Edit | SC order on BS-IV norms: the laggards have only themselves to blame

The Supreme Court order banning the sale and registration of vehicles compliant with Bharat Stage-III norms from April 1 is a resounding blow to manufacturers who were hoping to win a reprieve to clear their existing inventory. Instead, the Supreme Court ruled that only vehicles subscribing to cleaner Bharat Stage-IV emission norms should be sold in the country from that date in the interest of public health and curbing air pollution. The foolhardy automakers who continued to manufacture BS-III compliant vehicles despite being given one year’s time on April 1 last year to phase out their existing stock and begin the transition to BS-IV have only themselves to blame for the potentially huge losses staring them in the face. According to industry projections, manufactures have a whopping inventory of nearly 7.5 lakh two-wheelers, 75,000 commercial vehicles and 20,000 passenger cars that must be liquidated by March 31. The losses if these were to remain unsold have been pegged at Rs 12,000 crore, a humongous amount by any standard.

Not surprisingly, it is the manufacturers who have significant export markets, like Maruti Suzuki, Hyundai and Bajaj Auto, which began the transition to BS-IV well in advance. Bajaj Auto also petitioned the Supreme Court that showering relief on the laggards like Tata Motors, M&M, and Honda Motorcorp would give them an unfair advantage and was akin to punishing those who spent considerable amount of revenues in rehauling their assembly lines, engine technologies and cajoling dealers to join the BS-IV bandwagon. There is substance to the Bajaj argument as the BS-III vehicles are cheaper than their BS-IV counterparts. Even the government’s refineries have spent an estimated Rs.30,000 crore to produce enough BS-IV compliant fuel by April 1, 2017. In this regard, giving an exception to a few manufacturers would equate to penalising those who proactively prepared for the April 1 deadline.

Unfortunately, those left with the huge BS-III inventory also have a smaller export market compared to the likes of Maruti and Bajaj. Till the very end, they were arguing that the April 1, 2017, deadline pertained to stopping production and not the sale and registration of BS-III vehicles. The central government also appeared amenable to supporting this line of argument, which perhaps emboldened the manufacturers. Now that the Supreme Court has called their bluff it also calls into question the business strategies that these groups employ. They should have sought a clarification on the applicability of the norms considering that some manufactures interpreted the same norms differently. Perhaps the only category that deserve a longer rope are the heavy vehicle manufacturers where the body-building and other works have a longer gestation period.  

With the court drawing the line on BS-IV, this will also benefit the rollout of the BS-VI norms, slated for 2020. India has taken a bold decision to skip the BS-V stage (comparable with Euro-V) and go directly to BS-VI. This will increase prices of vehicles, but a more important aspect is that all manufacturers will have to go for technological upgradation suited to Indian road conditions, which are different from those in Europe and the US. It is a big question whether Indian manufacturers will be able to achieve the transition in three years. The present fiasco is a warning to the manufacturers to get their act right before it is too late.