Shishir Asthana Moneycontrol Research
A 'shock and awe' judgment is how an automobile industry player characterized the Supreme Court decision to ban the sale of BS-III vehicles from April 1, 2017.
Supreme Court has been hearing pleas of automobile manufacturers seeking permission for disposing of around 8.24 lakh BS-III vehicles which are held as stock. SC had hinted earlier that it would ban registration of such vehicles.
Before the judgment three options were being worked out – to ban registrations or to allow registration but ban plying of the vehicles in major cities and third was to penalize companies for the environmental hazards.
SC, who was advised by amicus curiae (impartial advisor) opted for the harshest measure. Industry is naturally crying foul now that they are holding an inventory of nearly 9 lakh vehicles.
The Society of Indian Automobile Manufacturers (SIAM) has said that the companies were holding stock of around 8.24 lakh such vehicles including 96,000 commercial vehicles, over six lakh two-wheelers and around 40,000 three-wheelers.
The industry has been arguing the case that BS III vehicles that they have already produced been allowed to sell as was the case in 2005 and 2010 when the earlier transitions were made. They also said that productions of BS III vehicles have been stopped.
However, SC is right is taking the tough step as the date of transition was known since 2010 when government started work on improving the quality of fuel. Around Rs 20,000 crore has been spent by the government in producing cleaner fuel.
The second point is the fact that out of the 20 most polluted cities in the world 10 are in India. Public health has become a prime concern as government and automobile manufacturers have been blaming each other for the high-level of pollution. Auto makers were arguing that the quality of fuel and roads are the main reasons for pollution, and not their engine. While environmentalists also placed the blame on the poor engine quality of Indian vehicles.
Even within the automobile companies there seems to be no consensus. Bajaj Auto had already moved away to BS IV compliant vehicles. So if one manufacturer could have done it there is nothing stopping the others from doing so.
In any case the inventory is small given the annual sales of vehicle in the country. As per SIAM’s website annual two wheeler sales is 16,455,911 or around 13.71 lakh per month. The industry is holding inventory of six lakh two-wheelers. Annual commercial vehicle sales stand at 6.86 lakh or around 57,000 per month while three wheelers clock 5.38 lakh in sales annually or over 44,000 per month. Present inventory of these two segments stand at 96,000 and 40,000 vehicles as per SIAM.
In other words the industry barely has 15 days inventory of two-wheelers, a month’s inventory of three-wheelers and less than two months of inventory of commercial vehicles. The automobile industry has had enough time on their hands to clear this inventory. If they are still left holding it in their hand when the date was known years in advance, it is only they who have to take the blame. Period.
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