Fuel economy standards for cars a step in the right direction: CSE
July 21, 2008
New Delhi, July 21, 2008: The Bureau of Energy Efficiency’s (BEE) latest initiative to set fuel economy standards and a labeling programme for cars has received strong support from Centre for Science and Environment (CSE). CSE has been demanding the standards and a labeling policy for a long time.
“We welcome the initiative of the BEE. These standards must now be implemented immediately to stop the frenetic oil guzzling and for a more energy-secure future,” said Anumita Roychowdhury, head of CSE’s Right to Clean Air Campaign.
The current BEE proposal that combines mandatory fuel economy standards with a labeling programme is expected to reduce oil use by as much as 20 per cent from passenger vehicles, by the year 2030. The standards are proposed to be established using a front-runner approach for each of the nine vehicle classes to be classified on the basis of the weight of vehicles. Front-runner vehicles are those that are already leading their respective weight-class in terms of fuel economy. This will push the rest of the carmakers to improve to catch up with the top runner.
Industry plays games Roychowdhury added: “It is, however, reprehensible that when the country is reeling under severe economic strain from the high cost of fuels, and household budgets are stretched, the automobile industry is resisting mandatory fuel economy standards for cars.” The industry is reluctant to commit to targeted fuel savings when both the government and the oil companies are absorbing more than 88 per cent of the oil import cost. Already, the total under-recoveries amount to nearly 3 per cent of country’s GDP. The losses per litre of fuel, due to under-recovery, act as perverse subsidy for car makers and users who are reaping the benefits at an enormous welfare cost.
Not only have car numbers increased, demand has shifted further towards mid-sized and bigger cars. That car buyers can afford to ignore crude price spikes and not feel the pain is clear from the spurt in car sales. The share of small mini cars in total car sales has dropped from 21 per cent in 2001-02 to 6 per cent in 2006-07. Industry explains this as brand fetish. But this also shows how market opportunities are growing in the bigger segments. Reportedly, the sales of leading car makers have gone up by 8 per cent in June this year compared to the same period last year, despite the hike in car prices, increase in excise duty on bigger cars and spiraling inflation. A staggering 48 per cent growth has been reported in the mid-size segment, while sales of compact cars have grown by a paltry 0.3 per cent in June. Luxury car numbers are also increasing.
“If we do not act now, oil guzzlers can make India’s oil security more precarious,” contends Roychoudhury. Lower diesel prices further insulate car users. Diesel is now subsidised to the extent of Rs 28.58 a litre, as opposed to Rs 16.34 for a litre of petrol. Fuel costs have led carmakers to step up production of the diesel variants. Popular compact car models are selling more diesel variants (which make up 65-75 per cent of their sales now).
The recent decision to slap a specific tax on bigger vehicles and SUVs to discourage oil guzzling -- although a step forward -- is still a knee-jerk response to the oil crisis. A move to tax oil guzzlers should be implemented as a progressive measure and coupled with fuel economy standards.
In view of this, the step taken by the BEE is very important and requires strong public and political support. It is an opportunity to retain the advantage of fuel savings from the small car fleet and also prevent a drift towards big oil guzzlers at the early stages of motorization. As the industry is also gearing up to meet the tighter emissions standards in 2010, giving them a combined target of fuel economy and emissions improvement will help to make appropriate technology choices to minimize trade-offs between efficiency and harmful emissions.
“With mindless motorisation taking over, a part of the reprieve lies in getting more miles out of a litre of fuel, even as the total miles are aimed for drastic cuts,” said Roychowdhury. For more details,