It was perhaps the most eagerly event in the automotive calendar, not just in India but also around the world. Globally, it could give a place to Tata Motors in automotive history; it could also be a victory to the bottom of the pyramid in India but at what social cost? Is it going to be a miracle or a menace?

Sunita Narain, Director at Centre for Science & Environment, BVR Subbu, Former President at Hyundai Motor India, Jagdish Khattar, Former MD of Maruti Udyog, Rajiv Bajaj, MD of Bajaj Auto, Surajit Mitra, Joint Secretary of Ministry of Heavy Industries and Hormazd Sorabjee, Editor of AutoCar debate it out with CNBC-TV18's Sheeren Bhan.

Excerpts from the CNBC-TV18's exclusive interview:

Q: Let me quote you at what the chairman of the inter-governmental panel on climate change says “The 1-lakh car is giving him nightmares". Is it giving you nightmares and if yes, then why so?

Narain:  The 1-lakh car per se does not give me nightmares, so I differ with Mr. Pachauri in that aspect, but cars do give me a nightmare and the fact, that a one lakh car now, which in terms of numbers will go up exponentially gives me therefore does not give me nightmares but just doesn’t let me sleep. Our biggest issue is that we have a very weak regulatory framework for motorization in India today; we have poor emission norms and virtually no mandatory safety requirements. We do not have fuel efficiency standards and we have a very distorted policy in which a car is promoted and a bus is negated.

Q: It’s a same regulatory framework for all the other cars as well? You would have been sleepless for the last 20 years now?

Narain: We have been fighting motorization the way government has been doing it for the last ten years in the city of Delhi.

Q: What are your specific concerns on the 1-lakh car?

Narian: The specific concern is that we have a very weak regulatory framework, which has been deliberately kept weak by the powerful automotive industry, and the 1-lakh car only takes greater advantage of the loopholes in the system and will therefore not lead to better mobility and equity, but only add to conjunction and pollution.

Q: She has made a strong comment on the auto lobby's invested interest at not allowing the regulatory environment to be as stringent as you would like it to be, Mr, Subbu, Mr Khattar, I would like you to respond to the regulatory framework in India is not as stringent as it should be, because the auto industry has vested interest and hasn’t allowed it to flourish?

Subbu: I think there is a past progress that you take that and you are bound to make mistakes as well as learn at a certain period of time.

Q: Are you saying the auto industry has made mistakes?

Subbu: Yes, the auto industry has not been as socially responsive as it ought to have been but that’s been in the past. People have worked towards improving emission norms or improving safety norms. Is that enough of that happening? No it’s not, I think a lot more can be done.

When we talk in terms of the Indian companies actually going global, we have to actually start thinking as global citizens again and if you can talk in terms of end of life requirements in cars that you sell in Germany, then tomorrow you should be doing the same thing for Indian consumers. If you are talking of ensuring that every car that comes out should meet the same standard, not the ones that are selected by ARAI (Automotive Research Association of India), those five cars taken out of 25 and checked and COP everything is hunky-dory, that is wrong.

With the exception of atleast three companies, I don’t believe there is consistency in quality of production in the industry. If you take a car out of the parking lot before dispatch, or you take a car randomly out of the dealer showrooms and check them, they will not meet emission norms.

Q: So you mean that Sunita’s concerns are legitimate?

Subbu: Yes, they are very legitimate.

Q: Would you agree? Do you think that the fears are legitimate or there is more provocation here?

Khattar: On balance, I don’t agree. We have to look at the whole thing in prospective, there is not one or two elements that create that problem, there are a number of things, and you have to deal with all of them at the same time and not take one or two and go after it.

As far as the environment and pollution is concerned, let’s just go back only eight-nine years, when India never had any emission norms, over a period of time, we now have about 12-13 cities which are already having euro 3 in all the cities but the fuel is not available, we have a roadmap of Euro 4 onwards. So as far as that is concerned, the automobile industry has done a lot in the last eight years to catch up with it, and now the difference between Europe and India is only three-four years. But the problem is fuel quality where adulteration is taking place.

I feel that we are still a developing country; we tend to bring all our global aspects to this. Our penetration of cars is still eight-nine; we have got a long way to go. If the economy improves, 60 million two-wheelers have to upgrade, for them also, there is an aspiration. So do not prevent them from buying incentive public transport, we have to deal with public transport in a major way. Look at Indore, they have done a public transport, Delhi has not been able to do it. So these issues are important but the solutions being given are not as they are manifested and a lot needs to be done in many ages.

Q: Bajaj Auto is also in talks with Renault to produce very competitive vehicles. Now how concerned are you on what you have heard, not just from this panel but what we have been reading about the targeted attack that the 1-lakh car from Tata seems to be faced with?

Bajaj: From what I have heard, there is a good place first of all to clarify that small and cheap is not necessarily the same, the K-cars in Japan and the Smart in Europe are small cars but they are not cheap and they comply with all the regulations related to emissions and safety that Sunita is referring to, because Mr. Tata or Tata Motors has announced an aggressive price tag, there seems to be an assumption that this product may not comply possibly with some of the norms. But Mr Tata has gone blue on the face saying that it will. So I think that we are judging the product prematurely.

As far as the issue of environment goes, my own view is that cars have never been greener, but the world has never been warmer. So I would agree with Mr. Khattar that the problem is more about working on the system than in the system and as manufacturers, we can only work in the system.

Narain: Absolutely, we got them done and I must say the two-wheeler industry was fantastic because it did understand the fact that if we have much more stringent norms than perhaps the rest of the world, it is actually is benefiting today. And my grouse is if Mr. Tata will not meet the current emission norms, my grouse is the current emission norms are not worth the paper that they are written on.

Q: Respond to Sunita’s comments that the regulatory environment in India is not really inline with what is happening internationally at this point of time and that you are not even thinking about it and you are giving industry, loopholes to try and get away with it?

Mitra: I think that you have to look at the inter-sector in its macro prospective. The Indian auto-industry is just 15 years old, 1993 was the year when it has come up. I agree with the panelists that there should be more work done but nevertheless, you were on Bharat State II and III and we are going to Bharat Stage IV in 2010. But there has to be a consistent auto policy, which we have been working out, and I am sure you have had a look at the auto vision plan, in which we have been consistently saying and we have been working on it and the good news is that the petroleum ministry has agreed that in 2010, they will come to 50ppm sulphur.

Q: We have heard about ethanol blended petrol and all of that has just remained on paper and very little has actually transferred on to the ground?

Mitra: We have put all our eggs in one basket in terms of blended fuel, because ethanol wasn’t available because of the problem with sugar industries.  Nevertheless, we are trying for solutions, saying that the government is not doing at all, or the government is allowing loopholes is not correct, the loopholes are there and we have to plug it as we go along.

Q: How swiftly are you going to plug these loopholes?

Mitra: We have a target of 2010.

Q: When the auto fuel policy was being discussed, we had talked about a leapfrog option, and about the fact that we will go to Euro 4, rather than going through Euro 2 and Euro 3, we talked about the fact that it would make the auto-industry in India more competitive, more global in nature. The government did not do it at that time and now you are talking about 2010 perhaps. Second, we have been talking about fuel efficiency standards which are not yet mandatory, when will they happen. We know that because of the pressure, the government has finally woken up and are insisting that it happens in one year. Will you make sure that it happens in one year?

Mitra: I am not very sure, it is easy to say that ‘jump to Euro 5 today or tomorrow’ but is the industry ready? Do you have the infrastructure ready? Do you have the fuel quality ready? Do you know how much of the investment one has to put in the refineries to upgrade this and where is the investment coming from. So it is very easy to hope and target what is the very best in this world, but look at your infrastructure, look at your capability, look at what you can do.

Q: There are concerns on whether the government should incentivise it or dis-incentivise consumers from buying it?

Mitra: Personally speaking, I am not in favor of both, let it be market-driven. Three things are very important when a new product in auto-sector is introduced, it should have safety system in place, and also it should have fuel efficiency because you are getting excise concessions and the emission norms.

Narain: We are talking about the loopholes and the poor regulatory conditions, which allow for the cheap and dirty motorizations and because of this, a car, which is cheaper, will be more of dirt. The problem is that today the car pays lower road-tax than a bus pays in the socialist country of India which is almost five times a bus pays, so correct that, make the bus cheaper and make the care more expensive. A car that you park in front of the road doesn’t pay the parking charges, pay the Rs 30 per hour charges that you are expected to pay and then let the market work. But the government distorts the markets; the industry works with the government, which further distorts the market.

Q: You just heard what Sunita said about the govt. distorts the market and the industry actually goes ahead taking benefits from it, you have heard the arguments on the congestion charges, parking charges, reducing road tax etc., lowering them as buses are concerned, and hiking them as cars are concerned, what are your thoughts on that?

Sorabjee: There is a point on the govt. that not much is being done on the policy, but under this sort of unfavourable or unpalatable framework, which Sunita is talking about, a small car is actually the most politically correct car you can get. I think, the Tata 1-lakh car should be actually glorified than vilified because there are a couple of issues on it, first its small in size, so it takes up a least amount of space, it has to be fuel efficient, so this whole rant about fuel efficiency, believe me the market will decide about it. If that car is not going to deliver 20-25kpl, it is not going to succeed. In terms of emission, it has got a smaller engine, so naturally it is going to throw lesser emissions and I think that is the whole case about the small car, its not just the Tata 1-lakh car but its also some of the models that Maruti makes and Bajaj and Renault are going to make. So the whole small car is the most politically correct one in our environment.

Narain: I totally agree with that but can I make it clear that we are not demonizing the small car. Let’s be objective about this, undoubtedly if you put a car versus another car; the small car is definitely better than the monster of an SUV, no question about it. But will anybody get the SUV off the road? No. All you will do is just add more small cars on the road and the numbers of cars are only growing. Currently the car growth rate is at 10%, with the small car, the projection is about 23%. So it is going to result in a huge explosion on the road and if you do not correct your parking issues, you are incentivising a public chance of congestions.

Mitra: Delhi, Bombay, Kolkata are not India, India is much larger than that. I feel that rural mobility is a must. If you have liberalized your economy, if the economy is coming up, rural mobility is a must. What are you providing for the rural mobility? Urban-rural connect today is very important. A farmer should be able to go and carry his sabzi to the mandi, his son should be able to go and work in a semi-urban situation, he requires mobility, and we don’t have proper public transport system adequate enough in the rural areas, we are improving our infrastructures, roads, etc, but the kind of mobility that we require we don’t have that.

The penetration level is only 7 and other countries have 556, so I mean that the Delhi, Mumbai congestion doesn’t matter to me. What matters to me is how rural India is doing, how semi-urban India is doing, how they will come up, how will I provide mobility, and if I am providing a safe car which is an all-weather vehicle, unlike a scooter, and no consumption and if it does have good affordability and secondly another thing, the more we have small car, there would be lower investment in cars, the money would get blocked and that resource could be put in other things, think macro and think what is happening in the country.

Q: Mr. Subbu and Mr. Kattar, I want you to respond to the point about explosion o Indian roads.

Subbu: When we talk about a 1 lakh car it’s not clear whether 1-lakh is going to be the consumer price, or the material cost or whether it’s going to be the ex-factory price, nothing is clear about it.

Khattar: The major issue as to why these things are arising is that our enforcement of laws is very poor. We have all the laws; our planners are very well versed with the international, they are able to formulate good laws, good regulations but if there is no enforcement and the problem in enforcement is that when you enforce certain things which have been legalized, you tend to walk on toes of many people and that we are not willing to do that and because you can’t do then you can go to the automobile lobby because there are only there are only ten of them.

Contd on page 2..