[sustran] Norms for fuel efficiency to put auto makers under pressure

[Vinay Baindur]

http://www.livemint.com/Industry/XctQqjlxvTagxqh4ZzsD3K/Norms-for-fuel-efficiency-to-put-auto-makers-under-pressure.html






*Norms for fuel efficiency to put auto makers under pressure*
The move, once implemented, is likely to reduce the carbon footprint of the
automobile industry

Amrit Raj


Under the new norms, the industry will have to ensure that the mileage of
cars on Indian roads improves by 10% by 2021. Photo: Bloomberg


New Delhi: In a setback to the automobile industry, already under pressure
because of declining sales, the government has notified mandatory fuel
efficiency norms that would push up their production costs.

At the same time, the move, once implemented, is likely to reduce the
carbon footprint of the automobile industry. It is the first time that such
norms have been introduced.

Of the more than 80 car models plying on Indian roads at present, only
around eight comply with these standards.

Under the new norms, the industry will have to ensure that the mileage of
cars on Indian roads improves by 10% by 2021. The second phase, for which
the government did not specify a deadline, will begin from 2022 and targets
a fuel efficiency improvement by 30%.

Failure to comply will invite a penalty. Under the Energy Conservation Act,
2001, car makers that fail to meet carbon emission norms will be fined
Rs.10 lakh initially and asked to pay a penalty of Rs.10,000 a day till
their car models meet the norms, said Ajay Mathur, director general, Bureau
of Energy Efficiency (BEE).


These norms were finalized by BEE, which functions under India's power
ministry.

The move couldn't have come at a worse time for the Indian automobile
industry, which is struggling with a decline in sales in the face of
slowing economic growth and is on course to post its first sales drop in 10
years in the 12 months to 31 March. Higher fuel costs and more expensive
loans have deterred car buyers in Asia's third-largest economy.

The move to enforce stringent fuel-efficiency norms is significant in the
context of higher oil prices, a weaker rupee and efforts to contain
pollution in the country. India imports around 80% of its oil requirement
and spent $144.293 billion on oil imports in the last fiscal year.
Carbon dioxide emissions by vehicles, after the implementation of the new
norms, are projected to come down from 142gm per km in 2010-11 to 129.8gm
by 2021-22 and 113gm 2022 onwards. A report by Yale and Columbia
universities last month called Delhi the world's most polluted city. Car
penetration levels in India are only 1/15th those of the US.
Carbon dioxide emissions by cars is likely to come down by 8.59 % by
2021-22 and by 20.42% from 2022 onwards.

This would mean that the car makers will have to make further investments
in new technologies in order to achieve greater fuel efficiency, which, in
turn, will have an impact on their profit margins.

Mint reported in September 2012 that the government's plan to enforce
stricter fuel efficiency norms for cars is likely to increase the cost of
cars by at least 15%. The industry lobby Society of Indian Automobile
Manufacturers (Siam) could not confirm the expected increase in cost.
Mathur of BEE added that since the norms had been notified, the bureau will
now begin work on a star rating system for vehicles.

As per the original plan, BEE was to give a one-star rating for the least
fuel efficient vehicles and five stars for the most efficient in their
respective weight class. Vehicles with a higher star rating are expected to
be more expensive. BEE had earlier formulated similar standards and star
labels for electrical appliances such as air conditioners and refrigerators.

According to data provided by Siam, car makers have sold at least 29
million passenger vehicles in India between 1960 and 2013.

A power ministry notification dated 30 January said the new norms are
applicable on the vehicles "used for the carriage of passengers and their
luggage and comprising not more than nine seats including driver's seat,
and of gross vehicle weight not exceeding 3,500kg tested on chassis
dynamometer (hereinafter referred to as the said motor vehicle) for the
purpose of manufacturing or importing for sale of the said category of
motor vehicles".

Chassis dynamometer is a device that measures the amount of power
translated from the wheels to the racing surface. These energy consumption
standard are for the motor vehicles using petrol, diesel, liquefied
petroleum gas (LPG) and compressed natural gas (CNG).

The government has extended the deadline for implementation of the new
norms by a year. Initially, the first phase was to be launched from 2015,
and the second from 2020. But a delay in notifying the norms has led to the
years being pushed to 2016 and 2022, respectively.

Vishnu Mathur, director general of Siam declined to comment. I.V. Rao,
executive adviser at Maruti Suzuki India Ltd, said car makers need to
improve the overall performance of their vehicles.

"In order to increase the mileage, the industry needs to reduce the
friction, increase combustion or reduce the inertia of the vehicle. Better
fuel efficiency could also be achieved reducing the weight and air
resistance," Rao said.

The power ministry has derived a formula based on the average fuel
consumption standard, where the mileage will be decided on the basis of
litres of fuel consumed by a vehicle to run 100km. In the first phase, the
government expects the cars to consume 5.49 litres of fuel on average to
cover 100km by 2016, thus increasing the average mileage to 18.2km per
litre from 16.5km in 2010-11, when the norms were initially proposed.

In the second phase, the consumption of fuel will come down to 4.77 litres
for 100km, increasing the mileage to 21km per litre.
Since fuels such as CNG, LPG and diesel offer better mileage for passenger
vehicles, the ministry has notified guidelines that make these fuels
equivalent to the petrol proportionately. The average vehicle weight for
this class of vehicles for the first phase will be 1,037kg, which will be
increased to 1,145kg.

On Thursday, the BSE Auto Index of 10 companies was down 0.17% to 11,922.86
points while the benchmark index Sensex was down 1.25% to 20,193.35 points.