The Indian auto industry should either say bye-bye to diesel engines else the Centre will levy 10% additional GST as pollution tax on diesel vehicles, said Nitin Gadkari, Union Minister – Road Transport and Highways.
However since then there has been a clarification from the minister thorugh his twitter handle @nitin_gadkari, stating, 'There is an urgent need to clarify media reports suggesting an additional 10% GST on the sale of diesel vehicles.'
The tweet continued stating, 'It is essential to clarify that there is no such proposal currently under active consideration by the government. In line with our commitments to achieve Carbon Net Zero by 2070 and to reduce air pollution levels caused by hazardous fuels like diesel, as well as the rapid growth in automobile sales, it is imperative to actively embrace cleaner and greener alternative fuels. These fuels should be import substitutes, cost-effective, indigenous, and pollution-free.'
Addressing the gathering at the 63rd SIAM annual convention in New Delhi, he added that with the growth in vehicle sales, the country was also seeing an increase in fuel imports. This was not only adding a burden on the oil import bill but also increasing pollution.
According to Gadkari, while the Centre has been pushing the industry to move to cleaner fuel options, it looked as if only a forceful implementation would wean manufacturers away from dirty fuels like diesel.
Reiterating that ‘hydrogen is the future’, the minister said the fuel played a pivotal role in reducing emissions. The Centre is in talks with the auto industry to fast pace the development of hydrogen including use of biomass.
Gadkari said automakers needed to look at other alternative and cleaner fuel options while also delivering safer vehicles. Ethanol seemed to be the quickest way forward in this space, he added.
While India has achieved 11.7% ethanol capability, the next 6-8 months would see it achieve its target of e20 ethanol compliance. Toyota Kirloskar Motor recently showcased its hybrid ethanol version of the Innova Hycross which runs on 60% electric power and 40% ethanol. It is one of the cleanest vehicles in the country today.
India also plans to collaborate with other G20 nations to fast track development of cleaner fuel alternatives. Bitumen is yet another clean fuel option and the Centre is working on solutions to produce rubberised bitumen using waste tyre materials.
On electric vehicles, Gadkari said India imports around 12,000 tonnes of lithium every year and there are plans to extract it from the Jammu reserves over the following year. The Centre is also working on e-highways which will be used by electric buses.
Beyond this, work is happening on developing new highways including the Chennai-Bengaluru route that should be ready planned by January 2024.
Increasing Profitability
According to the minister, while the industry is the biggest contributor to GST and plays an important role in economic development, manufacturers needed to increase their profitability.
As part of this effort the foremost area of focus should be to reduce logistics costs which is now 14%-16% of GDP, to 9%. For the record, it is 8% in China and12% in the EU.
Another key area for increasing profitability was vehicle scrappage. Though it is mandatory to scrap old petrol and diesel vehicles that are over 15 and 10 years old respectively, the general population is still reluctant to do so.
The minister urged vehicle makers to encourage customers in scrapping their old vehicles as this would go a long way in reducing pollution.