Producing cars and other light duty vehicles with higher fuel efficiency in a major market such as India is an imperative that cannot be delayed. The sharp growth in demand for petrol and diesel, and the rising burden of oil imports make that a priority. Countries with major manufacturing capacities are working to achieve higher average efficiency in their vehicles, with the twin goals of conserving fuel and reducing the emission of carbon dioxide, a greenhouse gas. Last year, the U.S. administration presented new average efficiency standards for vehicles that will be sold in 2025, of 54.5 miles per gallon of petrol. That metric would nearly double the efficiency of new vehicles compared to those currently being sold. The European Union also has a target of 4.1 litres of petrol and 3.6 litres of diesel per 100 km for 2020. China has been following a policy of mandated performance levels for each vehicle coming under specific weight classes. India cannot afford to delay its own programme on the wrong premise that it will affect the growth of the automotive industry. If anything, vehicle manufacturers should welcome the Power Ministry’s notification on fuel efficiency norms and its 2017 deadline — already pushed back from 2015 — for compliance, as it enables long-term planning.
China moved to implement new vehicle efficiency standards from 2005 to conserve oil and, in parallel, to encourage the industry to bring in better technologies. As the Global Fuel Economy Initiative of the U.N. Environment Programme points out, a major manufacturing country can afford to set clear standards in advance to facilitate suitable long term investments by industry. Road Transport Minister Oscar Fernandes is therefore wrong to argue for an even longer delay in standard-setting on the ground that the industry is experiencing sluggish growth. As it embarks on the efficiency quest, India should actually look for a leapfrog effect to ensure that only the most efficient vehicles are produced and sold. To address the ‘rebound effect’ — people driving more because cars give better mileage — it must incentivise alternative modes such as inter-city rail services and urban public transport. Also important is to achieve clarity of planning — the responsibility of achieving fuel efficiency should squarely lie with a single Ministry. That would avoid the kind of wrangling witnessed between the Ministries of Power and Road Transport. Given the intense pressure on foreign exchange reserves, India’s nascent efforts at introducing fuel efficiency standards need to be hastened. Globalisation should make it possible for industry to shift better technologies to market quickly and ensure compliance with higher standards even by 2015.