- The Union Government, through an order dated September 16, 2016, mandated Bharat Stage VI (BS-VI) mass emission standards for various classes of motor vehicles throughout the country from April 1, 2020, leapfrogging BS-V. While this will lead to better air quality in the short term, it also means higher vehicle prices and costs. For the automobile industry, this has meant accelerated development of all related technologies and components and big investments.
What makes BS-VI fuels cleaner?
- As per Bureau of Indian Standards (BIS) norms for upgraded fuels, (IS: 2796 – petrol and IS: 1460 – diesel), sulphur content is reduced to 10 mg/kg max in BS-VI from 50 mg/kg under BS-IV. This key reduction in sulphur makes it possible to equip vehicles with better catalytic converters that capture pollutants.
- BS-VI confers several benefits, the most important of which is limits set on Particle Number (PN) for engines, a reference to direct injection engines that emit more particulates but are more efficient and release less carbon dioxide. Also, there are lower limits for hydrocarbons (HC) and nitrogen oxides (NOx) in diesel engines and lower Particulate Matter limits for both petrol and diesel engines.
What impact will it have on consumers?
- Prices are the biggest impact factor both for commercial and passenger vehicles under the BS-VI regime, with one industry research estimate putting the increase at up to ₹20,000 for petrol cars, ₹65,000 to ₹90,000 for diesel cars, going up to ₹2.25 lakh for heavy commercial vehicles. Even two wheelers, requiring fuel injection technology, will witness a price spike of ₹3,000 to ₹6,000. However, these estimates are made a year ahead of the actual roll-out of BS-VI fuel nationwide, and the auto industry may opt to absorb some costs and pass on the rest to the consumer. In terms of fuel, the oil marketing sector has said the retail price increase for BS-VI fuel could be anything from a few paise per litre to ₹2.
- The giant scale of the shift needed to BS-VI can be gauged from the production base: the Society of Indian Automobile Manufacturers (SIAM) says the industry produced 30,915,420 vehicles ranging from two-wheelers to commercial vehicles in the year ended April 2019, with an annual growth of 6.26%.
- Maruti Suzuki, India’s biggest carmaker, for example, had to transition 16 models and 50 applications with tests across 60 lakh km. It decided to remove diesel models under the BS-VI category. Mahindra & Mahindra invested about ₹1,000 crore and several-fold investments were made by its suppliers.
- But Mahindra, Tata and several other companies said they would go ahead with diesel line-ups. Hyundai India which exports almost all its models does not face issues with migration and the company is said to be fully ready for BS-VI. Some new manufacturers such as Kia are entering the market with BS-VI vehicles.
- In the run-up to BS-VI, however, sales growth of vehicles has witnessed a slump due to a combination of factors, including economic conditions, weak rural demand and the impending shift to higher standards.
- As per June 2019 sales data released by SIAM, automobile companies sold 16.28% fewer passenger vehicles compared to June 2018. There was a 23.39% drop in the sale of commercial vehicles in the same period. Two-wheeler sales dipped by 11.70%.
What about the BS-IV vehicles already manufactured?
- Since there is no bar on the operation of existing vehicles beyond the cut-off date for BS-VI, that is, April 1, 2020, the inventory of personal and commercial vehicles will continue to be sold. This is significant for the commercial sector, which involves higher investments. After the deadline, however, all new vehicles sold must comply with BS-VI.
- A spike in sales of BS-IV vehicles is expected closer to the festival season, when buyer sentiment turns positive, and the industry prepares to liquidate its stock of soon-to-be obsolete vehicles. The outlook is unclear for heavy commercial vehicles due to recent changes that enable higher freight loading, and depressed demand for expansion.
- The availability of higher financing through banks after the move to recapitalise them, and higher liquidity in non-banking financial companies could also influence sales.
- What will the shift mean?
- As of January 1 this year, there were 57,468 retail fuel outlets of the oil marketing companies across the country. Although BS-VI fuel was introduced in the national capital last year, and extended to some contiguous districts in neighbouring States, the release of the higher grade fuel in all the pumps in the country has to be simultaneous. The auto industry wants it done by February. The cost of upgrading refineries to produce the higher-quality fuel is estimated at between ₹25,000 crore and ₹30,000 crore.