Indian court lifts diesel ban in Delhi that carmakers said hurt demand

Mumbai

INDIA'S highest court allowed registration of large diesel vehicles in New Delhi while introducing a new levy on purchases, lifting a ban carmakers including Toyota Motor Corp and Mahindra & Mahindra panned for hurting demand.

A one per cent levy will have to be paid to register the vehicles in the national capital region of the country, reported BloombergQuint, a partnership between Bloomberg and Quintillion Media in India, citing the decision on Friday of the Supreme Court in New Delhi. Mahindra's executive director Pawan Goenka said the carmaker is "very relieved", while Daimler AG's Mercedes-Benz rejected the levy's premise that its vehicles pollute the environment.

Although the decision will pave the way for sales of large diesel sedans and sport utility vehicles (SUVs) to resume in one of the country's biggest car markets, the additional charge may discourage some buyers. Toyota had said the ban curtailed sales growth, while market leader Maruti Suzuki India said it wasn't in favour of additional levies.

"Hope this decision will put all controversy surrounding diesel fuel behind us," Mr Goenka said. "We will be able to focus on the more important task of making our vehicles compliant with Bharat Stage 6 norms by April 2020."

The government in January said it will impose tighter vehicle emissions rules four years early, skipping a transitional step offered in other countries to combat worsening air pollution.

The charge will be on top of fresh levies imposed in the government's annual budget on new passenger vehicles. The ban on diesel engines two litres or larger imposed in December hit sales of some models and prompted the introduction of gasoline variants and smaller diesel engines.

Mahindra has introduced smaller engines for its popular SUVs as well as new compact models with variants powered by gasoline. Local deliveries jumped 13 per cent in the April-July period, compared with an 8.5 per cent decline in the year-earlier period.

While Toyota's sales expanded at a slower 1.6 per cent pace, its deliveries of Innova multipurpose vehicle have climbed 38 per cent with the introduction of a new version in May. The carmaker this month started selling a gasoline-powered Innova Crysta.

Mercedes-Benz posted sales of 6,597 units in India in the January-June period, down 0.9 per cent from a year earlier, according to its website. The company has the technology to switch its entire fleet to BS 6 by 2018 and said the introduction of compatible fuel will be the "best viable option to curb pollution", the German carmaker said on Friday.

"Lifting of ban on bigger vehicles in the national capital region is a good move because this step alone will not address the emission issue," Abdul Majeed, partner at Price Waterhouse, said. "We need to figure out holistic solutions in the automotive sector by replacing old vehicles on the road, promoting environment friendly vehicles as well as significantly improving public transport." BLOOMBERG