CHENNAI: Shaking up the complacent auto sector with a landmark verdict, the Supreme Court on Wednesday ruled that it would not allow sale or registration of vehicles manufactured under Bharat Stage-III (BS-III) emission norms from April 1. With the deadline ending on Friday midnight, manufacturers are stuck with more than 8.2 lakh obsolete vehicles across segments, worth more than Rs 12,000 crore.
“Health of the citizen is more important than commercial interest of auto manufacturers. We cannot allow polluting vehicles to ply on roads,” the court said. While the notification to shift to BS-IV standards by April 1, 2017 was given way back in 2015, manufacturers argued the deadline was only for halting production and not sales.
However, the Environment Pollution Control Authority has been giving repeated warnings to scale down production for the last six months. But the production continued steadily, even after January.
Society of Indian Automobile Manufacturers’ (SIAM) president and Ashok Leyland managing director Vinod Dasari stated that this means “utter chaos… for dealers and finance companies which have sold BS III…”. But, SIAM would abide by the verdict, he added.
Dealers claim the total worth of inventory that cannot be sold in the Indian market after April 1 is over Rs 12,000 crore. Unsold BS-III inventory stood at 8,24,275 as of March 20. “Some of these are stock with dealers. If we add that, the inventory goes up to as much as 11 lakh units,” pointed out John K Paul, president, Federation of Automobile Dealers Associations (FADA).
SIAM and FADA are yet to decide on who would absorb the losses. Discussions on that would begin immediately, said Paul, adding that many dealers are “small fries” who cannot take these losses.
There aren’t too many options for automakers.
The only one with minimal losses is to off-load the stock in export markets with older emission norms, say analysts. Ashok Leyland will do so, after fulfilling current customer orders over the next two days. This, according to Darsari, would nearly exhaust inventory. The rest would be refitted with BS-IV parts. Others are also likely to follow suit.
However, refitting will be an expensive affair. “It is likely to cost anywhere between Rs 4,000 and Rs 5,000 for a Rs 40,000 two-wheeler,” said Abdul Majeed, of PwC.