The oil price surge has left the market watchers and media agog. Expert views sparred on price insulation, energy security and our vulnerability. It was fascinating to follow the desperate bid to brag that the global crude price hike will not hurt Indian incomes as much as they did the last time. Oil dependence of Indian income is on the downturn as we are earning more from non-oil based IT sectors. Reportedly, India’s oil consumption to GDP ratio has fallen by 56 per cent since the nineties. So why worry if local oil consumption on a stand-alone basis is up more than 95 per cent over the years – import dependence is up to 70 per cent! So what – our GDP growth is even sharper. Such a false sense of security in the increasingly energy insecure country!
None cared for the view that the drops in oil-GDP ratios, rapidly becoming a trend in developed countries, are also the result of efforts to use energy efficiently and cut overall oil consumption. That even the transport sector is up for harsh energy cut targets. No attention was paid to the complex challenge posed by the energy intensity of the transport sector in India, where transport demand has grown 1.2 times the GDP growth rate.
The cost-push effect of oil prices due to increased transport cost was about all that was heard on this matter. The complex web of pollution-energy-carbon- intensity of urban transport and the need for an energy policy to deal with it simply fogged the policy minds. The Indian transport sector already consumes nearly one-fourth of the total commercial energy, and almost half of the total petroleum products. Energy demand from urban transport in Delhi alone is expected to increase three-fold over the next decade. Nobody paid heed to warnings that the explosive growth in personal transport will dominate the increase in transport-related energy demand in the future. And we need to act now!
We are not surprised therefore to see the August 2004 report of the Parliamentary Standing Committee on Petroleum and Natural Gas propagating increased exploration efforts in order to improve domestic availability of oil as the key solution to growing import dependence. The report considers ethanol blends, driver-training programmes, and upgrading the garages of state public transport undertakings to improve fleet maintenance, as sufficient to conserve oil in the road transport sector. Pushing for fuel-efficient vehicle technology, controlling gas-guzzlers on road, or reducing vehicles miles traveled are not even on the agenda.
The official position on emissions control or fuel efficiency improvement is always that of status quo. It was amusing therefore to read the recently-released, ‘India’s Initial National Communication’, drawn up by the ministry of environment and forests for the UNFCCC, as part of the government’s self-reporting on its efforts to lower carbon and energy intensity of the Indian economy. It has simply superimposed the carbon and energy reduction goals on the minimal efforts made so far to reduce local air pollution. Without ever being serious about developing policy measures to address these issues explicitly, the report indulges in cosmetic claims – we follow Euro II in some cities that is more energy efficient...!
Resting the roost is the Indian automobile industry, happy with the knowledge that it contributes 4.5 per cent to India’s GDP. It forgets to calculate the cost to the nation on account of not committing to a combined target of improving fuel economy and lowering emissions significantly.
Detractors may gun down the idea of discussing fuel economy regulations in India as esoteric. But despite the odds, policy discussions on the matter have made a hesitant beginning. The Auto Fuel Policy first fumbled on the fuel efficiency mandate for the automobile industry. Even while recognising the merit of such moves, it stayed away from recommending fuel economy regulations. It instead settled for a mandatory voluntary declaration of fuel economy for each model "to enable informed customer choice."
The fact that such voluntary measures are not sufficient to sober intoxicating gas guzzling on Indian roads came to sharper focus recently when the Madras School of Economics and the National Institute of Public Finance and Policy submitted a report to the environment ministry proposing, ‘Taxes on Polluting Inputs and Outputs’. This report exposed how close we are to a worsening fuel economy. As of today, a large number of car models fall in the fuel economy range of 12-16 km/litre and their engine capacity ranges from 796 cc to 1800 cc, with most models in the 796 cc to 1400 cc range. But already a dramatic shift is evident towards mid engine capacity, a trend that is expected to only accelerate in the medium term. The 1000-1700 cc segment is likely to dominate the Indian car market – already the combined share of the total sales in this segment has increased from 44.5 per cent in 2001 to 63.3 per cent in 2003.
The report therefore categorically observes, "This is perhaps the right time for improvement in fuel economy of vehicles by sending appropriate signals through a resource tax on vehicles." This most significant proposal directly targets the fuel consumption of vehicles based on their fuel economy. The environment ministry is now expected to act on the recommendations of this report.
Waiting in the wings to get this recommendation knocked out from the report is the apex association of the automobile industry, SIAM. It has already taken up cudgels to argue that in the current competitive environment, fuel efficiency is the unique sales proposition of manufacturers. Indian vehicles have good fuel efficiency. Regulatory intervention on this front, they maintain, is not desirable.
But the auto industry did not lose this opportunity to peddle and hard sell diesel cars in the name of fuel efficiency. While denouncing the additional emissions tax on diesel vehicles – yet another recommendation of this report – it claimed this would come in the way of achieving energy conservation!
Amazing! To avoid commitments to legally enforceable fuel economy improvement targets, industry wants to use diesel as an escape route. Unfortunately, lack of data in the public domain on the trends in fuel economy performance of different model categories over time makes it difficult to challenge the industry’s claims. Yet the limited vehicle certification data available shows that a majority of petrol car models in the range of 796 cc to 1500 cc engine capacity became more fuel efficient when they moved from Euro I to Euro II standards. However, a popular diesel car model actually shows a decline from 18.01 km/litre to 17.81 km/litre. The same trend is evident even in popular diesel SUV models. It is worrying that the fuel economy advantage of the small Euro II petrol car segment (ranging from 15 km/litre to 17.57 km/litre) can get significantly eroded if a sizeable fraction of the future demand shifts to bigger diesel cars, especially Euro II SUV models, that record levels below 13.3 km/litre – even 10 km/litre.
We cannot wish away the urgency of fiscal measures to influence customer decisions and improvements in technology. The new report makes a strong case that even with higher engine capacity, fuel efficiency can improve with improved technology. It cites examples of three models with engine capacities of more than 2300 cc whose fuel economy range from 10 to 12 km/litre, significantly better than the rest in the same league, whose fuel efficiency is below 10 km/litre.
The government must begin to get serious. Expose industry folklore. It is time to address trade offs and not repeat the mistakes of Europe -- promoting diesel technology to improve fuel economy and reduce carbon dioxide emissions, only to realize, as did Germany, that its particulate emissions are threatening to be higher by 60 per cent than earlier projected for 2020.
Integrate the overarching principle in air quality management policies - simultaneously reduce the pollution-energy-carbon intensity of urban transport systems.
Open up opportunities for research that the industry on its own has initiated in order to introduce advanced emissions and energy efficient vehicles, such as hybrids in India. Several Indian companies including TVS, Bajaj, Ashok Leyland, and Mahindra and Mahindra have begun work on hybrid vehicles – three-wheelers with hybrid propulsion, range extender hybrid truck prototypes, etc. But without development goals these stand no chance of making commercial entry under the current emissions standards regime. What a colossal waste this is -- reducing these promising efforts to lazy research and using the recent Budget sops for R&D as a tax haven.
-- Anumita Roychowdhury
Right To Clean Air Campaign