Exit of BS-III vehicles: Industry experts discuss the way forward

Also read: Vehicle makers have no right to crib over SC’s BS III ban judgment

However, Bajaj strongly feels that the loss to the industry due to unsold inventory is not such a big concern, the main concern is about the air pollution, which is the moot point. So, it is a matter of principle and he is happy with the Supreme Court’s decision.

Kirloskar said the company always had a stand that they would change from BS-III to BS-IV as fast as possible, which they adhered to. So, we have no inventory left.

He said, “As a company, we have taken a stand that in the long-term we go with global safety standards and global emission standards. Then you will beat any of these policy uncertainties.”

Salve said, the industry had been well informed and was aware of the cut-off but instead of migrating to BS-IV they continued producing BS-III vehicles.

Going forward, he would move an application in the Supreme Court to seek clarity on BS-VI implementation, said Salve.

Below is the transcript of the discussion

Q: How does one respond to this because the fact is just about December, 2015 we had another adverse judgement from the Supreme Court at that point banning sale of Diesel vehicles above 2000 cc. Close on the heels of that now you have a judgement like this which I dare say, many CEOs that we were in touch with were not expecting. Your thoughts?

Dasari: First and foremost, we all have to respect whatever the Honourable Supreme Court has given its verdict. There is no question about not following that. So, with that let me say that I find it rather odd. There is a law that has been stated very clearly by the government saying that you can manufacture up to March 31 and you can sell after that. This is the law, this has been the past presidence, this is what everybody has been following and it is inappropriate to say that everybody knew about it. Let me clarify, commercial vehicle makers and all the auto makers in this country have been making BS-IV vehicles since 2010.

So if there was so much interest in improving the pollution, first and foremost, why was it not said that we should be pushing the petroleum companies to be providing fuel available from 2010? For seven years we have been making BS-III vehicles because of lack of fuel. And suddenly, one month before or two days before, to be exact, before the deadline comes, a verdict like this comes, now we have no choice but to honour it. But I find it quite frustrating that a law has been made. You follow the law and suddenly something goes wrong like this.

The second thing I would like to say is we have hundreds and thousands of vehicles which are BS-I and BS-II. I have been saying again and again and SIAM has been saying, if you want to reduce pollution, please reduce polluting vehicles. Why is there no ban on old vehicles and instead those vehicles which we have been producing for the last seven years, because of lack of fuel, suddenly two days before, we get a judgement like this so it will cost some utter chaos in the auto industry for some time for the next few weeks or so.

Ashok Leyland per se, now I speak from Ashok Leyland perspective, we have very little impact because we do not have very much unsold inventory and whatever is left over, we will sell it off in exports. We have no impact, but I am sure it will cause a lot of confusion for the dealers for the finance companies who have sold the vehicles and so on.

Q: Sunita Narain, you and I spoke briefly yesterday outside the court and there also, the sense was that perhaps, this time around, the court may take the auto industry's concerns on board especially because the government had also come out strongly backing. On that limited point, were you also pleasantly surprised by the unambiguous verdict that the Supreme Court has passed this afternoon?

Narain: It is not about surprise. I am certainly very happy that the court has weighed in on behalf of public health. And I am really surprised Mr Dasari continues to take this position because the fact is six months ago Environment Pollution Control Authority (EPCA) had discussed this matter with SIAM and in a meeting where Mr Dasari was also present. And we have been emphasising that unlike the other transitions that has happened between BS-I, BS-II and BS-III, BS-IV has been spread over seven years. Car companies are more than ready with products which are compliant with BS-IV and therefore, all our request was ramp down your production of BS-III, ramp up your production of BS-IV.

It is really amazing to me that the auto companies are now running to government and yes, absolutely, I am equally, I was very hurt yesterday and shocked and frankly something that should make us all sit up that the government seems to be the large refuge of the automobile companies and the government will go out and bat for them in a way that it was personal abuse against EPCA, personal abuse against somebody like me just for defending the right to clean air. And all the court has said and I think, has reiterated is given the level of pollution in our cities, automobile companies will have to walk the extra mile. That is what we were saying.

Nobody refuted the fact that the last date of manufacture was March 31. But the fact is given the given the state of extreme pollution in the country, given the fact that clean fuel was now available across the country at tremendous cost, we could definitely make sure that only clean vehicles are registered.

And I was just want to add this that the fact that while we understand the point about older vehicles, but the fact is you would have to put on the roads another 90,000 trucks and commercial vehicles between Tata and Leyland on roads which would be in part of the stock that you would need to phase out. And that is why every little bit counts.

Q: At the end of the day, the overall inventory size, the unsold inventory for BS-III vehicles across all categories is a little over 8,00,000 units, at least according to the information that has been provided in the court. Many would argue that this will only have an incremental impact as far as decreasing the air pollution goes. But the industry claims that the losses could be to the tune of Rs 30,000 crore. So, in that sense, would you perhaps say that it is a little harsh on the auto industry which is already so regulated which pretty much complies with all the regulations?

Bajaj: No, I would absolutely not. There are some things that you cannot put a price on. We cannot get intimidated by Rs 30,000 crore and Rs 3,00,000 crore and this kind of stuff. This is about the air we all breathe including our children and their children to come. I refuse to sit on a fence on this. And my point is very clear. What did Mrs Thatcher say years ago? She said,"We will stand on principle or we will not stand at all."

So, this is a matter of principle. Just because it is Rs 1,000 crore we make one decision, if it is Rs 1,00,000 crore, we make another decision. This is called uncertainty, this is called unpredictability of policy. Now it is very predictable and certain. Everybody will think twice before interpreting something and let me also say this. It is true that the notification said production, not sale. But let us also acknowledge that everything that s good and great cannot be always just written down. You have to read what is unwritten and you have to hear what is unseen. You have to make a decision even with your heart and your conscience, not just based on what suits you.

Q: Yours is an interesting company because Toyota was among the most affected manufacturers when in December, 2015 the ruling came that diesel engines above 2000 cc cannot ply on Delhi, National Capital Region (NCR) roads. This time around, you took a slightly different position. I would say you were closer to Bajaj Auto and EPCA\'s position than the rest of the SIAM. But, did SIAM perhaps, misread the mood of the nation as well? You were president prior to Mr Vinod Dasari. Could SIAM have dealt with this in a different way? Could you have not convened a meeting and seen the writing on the wall so to speak?

Kirloskar: I believe we have had many meetings in SIAM regarding this issue and it was discussed fully. Some companies have taken different stances. Our stance, as Toyota Kirloskar Motor was that we have to change over from BS-III to BS-IV as fast as possible and we did that last year. We have no inventory left of BS-III for a long time. And we are going to do the same regarding BS-VI as well. Our present Camry an Camry Hybrid is well below BS-VI standards even with the BS-IV fuel.

So as a company, we have taken a stand that in the long-term we go with global safety standards and global emission standards. That is the only way to go. Then you will beat any of these policy uncertainties.

Q: Was there perhaps need also for the industry to come together and self-regulate itself? Try and sense the mood because especially when in December, 2015 the Supreme Court made its intentions very clear that it was willing to fight this menace of pollution could the industry have done more? That is my first question. And secondly, are there any options now on the table in terms of moving perhaps a curative petition? How will the industry now respond to this?

Dasari: Since you asked that question let me first say how the industry responded. Let me say this on behalf of the industry. There is no country in the world where the auto industry has accepted proactively that they will go from BS-VI to BS-VI in three years. Europe and America have taken 10-12 years. So, let us not put the industry to say that industry is not accepting the norms. Indian auto industry has accepted safety and emission norms faster than any other country in the world. That is a fact.

Second thing I would like to respond. I fully agree with what Rajiv is saying that we should all stand on principles. Absolutely agree with it, but let us also talk about, in his industry it does not affect, but in a commercial vehicle industry, and I tried to explain this to Ms Sunita Narain also, I have been making BS-IV vehicles since 2010, my customers will not buy BS-IV vehicles because BS-VI fuel is not available is not available across the nation. If you take a BS-IV vehicle and you put BS-III fuel in it, the system will clog. This is a technical requirement no matter which type of vehicle you use.

So, this is not something that we were not willing to do. All the vehicles that I was selling in the major cities and Tata was selling or Mahindra was selling in the major cities, were selling BS-IV where fuel was available and the customers had access to fuel, we were selling. It is only those places where the fuel was not available, not by intent, but because fuel was not available. Let us just be very clear on that fact.

Q: This point has come up in several discussions on terms of migration, please respond to that. As EPCA did you also reach out to the oil marketing companies to address this issue that Vinod is raising?

Narain: Oil marketing companies had already made BS IV available for the past 3 months simply because as Vinod Dasari knows you don’t switch on the tap one day. The fact is they had cleaned their pipelines, BS IV was available across the country more or less from January onwards.

Second point that we made to Vinod Dasari is, we understand but the fact is and they could have taken advance orders and said that they would deliver them post April. The fact is we have asked them consistently, show us your orders, show us your inventories but they have never complied.

The fact is all I would argue with SIAM is because SIAM is now – I don’t know if it is Vinod Dasari’s leadership or what it is but they have certainly decided to go all out to try and discredit EPCA right now. To go out and personally abuse us and to attack us and to do everything that they can to destroy out authority. I don’t know why they are doing it because I thought we are in a common fight together. We have constantly tried to keep the dialogue going, we have constantly tried to ask them what is their concern and meet them wherever we can halfway but the fact is air pollution is today a huge issue and we need to take that extra step and that is what the court has said, walk the extra mile. That is what I expected industry to see the writing on the wall and they didn’t. They are like ostriches with heads in the sand hoping that the problem of pollution is something that is only confined to Delhi. The fact is they hoped that they will run to the minister of surface transport or some other minister who is going to protect them. That is all Indian industry hopes to do. Abuse the messenger, go running to government.

Q: Do you want to respond to this?

Dasari: I don’t want to respond to any personal allegations whether against me or against SIAM.

Q: Vikram, do you want to be less diplomatic than that?

Kirloskar: It is not an issue of being diplomatic. As a company and personally, I want a clean environment. I absolutely want clean environment, that is the only way to go ahead and that is why as a company, we are focusing on that. That is part of our strategy. But, I do not think we have our heads underground like ostriches. I respect science, I want a scientific way, data-driven way how to get rid of pollution, how to improve the environment. That is all I have to say and that is what we are trying our best to do.

Q: Rajiv Bajaj, you have broken ranks with the industry. Before you did that, you are still a member of SIAM, did you not, at any point of time, in any of your forums, whether it is executive council meeting or whatever that SIAM regularly has, really tried to put across the views that you are now expressing through the media? Did you try also speaking individually with the companies to try and again, revisit SIAM's rather confrontational approach?

Bajaj: Although I not fully conversant with the issues of the commercial vehicle industry, I think Vinod has a valid point when he talks about the registration of the vehicle. But I do not want to say more about it because I am not fully aware of it. However, when it comes to two-wheeler and three-wheeler, as he has also acknowledged, that stumbling block is not there. And as far as I am concerned, I never thought of raising this issue much before, because it was obvious to me that if new products have met with BS-IV since April 1, last year then what is unwritten and what is unsaid was obvious to me. So, we never thought of it in any other manner.

It was only when, in the last few months, the issue was brought up by EPCA that it became obvious that there are some manufacturers who despite demonetisation, despite approaching April 1, 2017, instead of winding down, they are ramping up their BS-III production. Now, this I would say is really not a worthy behaviour for an industry like ours of which I am very proud to be part of because we are a great industry.

Having said that, since something has been said for the last five minutes, let me say this. It takes a lot for EPCA and for Sunita and her colleagues to stand up to all the pressures that are around them. So, let us be very aware of that and I salute them today for the work they have done.

For the entire discussion, watch videos