'Diesel Tax' might follow 'Diesel Ban'

After banning the registration of diesel vehicles having an engine capacity of 2,000cc or above (for a trial period of 3 months), Supreme Court might levy an extra tax on diesel cars.

Delhi continues to be the hot-spot for the automobile world. Firstly it was the “odd-even ban”,  then it was the stop on registration of diesel cars and now it can the “Diesel-Tax”. Yes. After banning the registration of diesel vehicles having an engine capacity of 2,000cc or above (for a trial period of 3 months), Supreme Court might even levy an extra tax on diesel cars. The apex court while delivering the judgement on stopping the registration of diesel vehicles, announced that it would impose a one-time pollution tax on small diesel cars in the new year. To make the situation worse, the tax will be applicable even on vehicles having engine capacity of less than 2,000cc. According to reports, SC will be hearing the statements from concerned parties regarding this decision on January 5, 2016.

The temporary ban on registration of diesel cars has caused stir in the automobile industry. Mahindra & Mahindra, one of the worst hit victim, said, “The company would hope that at the end of the interim period of March 31, 2016, the judiciary and the regulators would look at the impact of these measures and take a holistic view on improving the air quality of Delhi, taking into account the overall impact of each action. In the short term, the Honourable court’s order today, affects the sales of some of the company’s products in NCR. The vehicles affected represent about 2% of the company’s total monthly sales. The company is in the process of evaluating various options to work within the framework provided by the Honourable Supreme Court.”

Vikram Kirloskar, Vice-Chairman of Toyota Kirloskar Motor, expressed reservations in an evasive manner and said, “To improve the air quality from a vehicle point of view, we must take a comprehensive view of various factors causing pollution. These can be categorised into infrastructure-related pollution including traffic congestion areas and contribution by the industry, usage-related pollution considering the stop-start nature of traffic, and vehicle-related compliance to various emission norms. Based on all such factors, it would be appropriate to draw an action plan which helps improve the air quality in a sustainable manner”.

While the odd-even ban had similar impact on all the carmakers and Delhi government is expected to handle the ensuing load on public transportation, this recent ruling gives another major blow to companies like Mahindra, Toyota, Mercedes-Benz and BMW. As a result, Mahindra & Mahindra’s shares slumped 5.5% on the same day judgement was given. What is more worrying for these companies is that the “Ban-effect” might percolate to other states of the country.

Also read: Mahindra Crippled in Delhi as Diesel Ban Piles up Cars worth Rs. 1,000 Crore