Press Release: CSE trashes contention that diesel use by cars is very low

Says this is a ploy to avoid higher taxation on diesel cars

  • Diesel car sales are on a high. Cheap diesel is pushing the car market towards bigger cars that guzzle more fuel. While 87 per cent of petrol cars have an engine size less than 1,200 cc, about 40 per cent of diesel cars sold are above 1,500 cc

  • Excise earnings from both diesel and petrol have nearly equalled even though petrol pays seven times more excise

  • But even as the demand for higher tax on diesel cars gets louder, the car industry is getting desperate to prove that cars use negligible amount of diesel

  • New number game says diesel cars, SUVs and taxis use only 5 per cent of total diesel used – cars use 0.6 per cent. What is behind these numbers?

  • CSE analysis finds industry is playing with data to confuse and obfuscate.

  • Demands additional tax on diesel cars to reduce public revenue losses and public health costs

New Delhi, January 25, 2012: In 2011-12, diesel cars will account for over 40 per cent of the total car sales in the country. Also, for the first time ever, bigger diesel cars – the SUVs – are selling more. There is no slowdown in dieselisation, finds a latest analysis by Centre for Science and Environment (CSE). How then, asks CSE, can the automobile industry claim that diesel cars use negligible amount of the fuel?

Increased use of diesel by cars means enhanced public health risks. It also means greater revenue losses due to the under-priced and under-taxed fuel -- with each litre of petrol replaced by diesel to run a car, the excise earnings of the government drop seven times. 

Says Anumita Roychowdhury, CSE’s executive director-research and advocacy and head of its air pollution and urban mobility team: “Without fiscal brakes in the forthcoming budget, India will pay a heavy price. The automobile industry is trying hard to prove that cars and SUVs are very small users of diesel, so that it can block the growing demand to  put higher taxes on diesel cars to offset the revenue losses and cut public health risk.”

CSE’s review of the market trends reveals some alarming pointers:

  • Explosive dieselisation: Diesel cars are 40 per cent of new car sales already. The Petroleum Planning and Analysis Cell of the Union ministry of petroleum and natural gas says petrol consumption has slowed down, while diesel use has registered 6.4 per cent growth.

  • Cheap diesel is pushing the market towards bigger cars that guzzle more fuel: About 40 per cent of total diesel cars sold in the country are above the 1,500-cc range. In 2011-12, cars above 2,000 cc – which include SUVs – have registered a 41 per cent growth rate in sales.

  • Car industry on an overdrive to produce more large diesel cars: There are 24 diesel car models in the engine size class range of less than 1,400 cc; 42 models in the range 1,401-2,000 cc; and 61 models in the class above 2,000 cc engines. This shows how more models are proliferating in the big car and SUV segments.

  • Enormous revenue losses: With each litre of petrol replaced by diesel to run a car, the excise earnings of the government drop seven times. These revenue losses will compound with the increased share of diesel cars and SUVs in the market. The effect of increased use of diesel in cars is so dramatic that the excise earnings from both diesel and petrol has nearly equalled. According to CSE researchers, if the new diesel car fleet were to pay the same excise as that of petrol cars, the potential excise revenue can be Rs 100,000 crore from the lifetime fuel use of the new car fleet to be sold between 2009 and 2015.

Industry upping the ante FOR diesel cars
It is shocking that when the demand for higher taxes on diesel cars is hitting a crescendo, there is a strong move to block it. Estimates reportedly arrived at by Society for Indian Automobile Manufacturers (SIAM) and the 12th Planning Working Group on Petroleum Sector (WGP) are trying prove that diesel cars use a negligible amount of the fuel – according to it, personal cars, SUVs and taxis together consume only 5 per cent of the total diesel used up in the country.

Hogwash, say CSE researchers. Especially in the light of another set of estimates done by the government’s own Petroleum Planning and Analysis Cell (PPAC) -- and cited in the Planning Commission’s Kirit Parikh Committee Report of 2010: the PPAC says diesel passenger cars use up 15 per cent of diesel and are the second largest users of the fuel in the country.

CSE has decoded the number jugglery, and found that…

  • SIAM/WGP estimates have reduced the share of diesel use by all the key sectors of the economy. Created a mysterious category called “others” that uses up more diesel than the power and industry sectors put together: This undefined category “others” – which is said to be eating up 12 per cent of the total diesel used in the country -- has not been accounted for by SIAM/WGP. Asks Roychowdhury, “What are these substantial uses of diesel that do not get covered by industry, power, agriculture or transport and is outside the policy purview of the government? But by using this category the relative share of the critical sectors of economy -- transport, industry and power -- have been reduced significantly.

  • Increase in use of diesel in the country is not reflected in the transport sector: Strangely enough, even though overall diesel consumption has gone up since 2008-09, the share of road transport sector remains unchanged in the SIAM/WGP estimates. In 2008-09, the PPAC had estimated the total diesel consumption in the country at 51,700 thousand metric tonne (TMT). In 2011-12, SIAM/WGP estimates put the figure at 63,001 TMT – which was a 20 per cent jump. But this increase is not reflected in the SIAM/WGP estimate for the road transport sector, which is the largest user of diesel.

  • Number jugglery for transport modes: What SIAM/WGP have cleverly tried to do is reapportion the diesel used in the road transport sector to all the modes. Accordingly, passenger diesel three-wheelers use six times more diesel than cars. Use by cars, jeeps/MUVs and taxis (official vehicle registration category) has been reduced to half of the previous estimates of PPAC.

  • Do diesel passenger three-wheelers use three times more diesel than cars? The new number game shows that diesel passenger three-wheelers use several times more diesel than cars. Passenger three-wheelers are sold at a rate of around 130,000 per year, whereas close to 700,000 diesel cars and SUVs are sold each year now. Even if diesel passenger three-wheelers are driven more, they cannot possibly use more diesel than cars and SUVs.

  • Even the juggled numbers expose massive dieselisation of the car segment: Even at 5 per cent as the SIAM/WGP estimate, cars, taxis and jeeps are using up 3,276 TMT of diesel. Petrol cars are using about 4,272 TMT of petrol – a third of the total petrol consumed in the country. This means diesel fuel is already more than 40 per cent of the total fuel used in the car and SUV segment. The real concern is the rapid increase in the use of diesel in car and SUV segments. In 2010-11, the car industry sold about 800,000 diesel cars (32 per cent more sales than the previous year). Says Roychowdhury: “Even if we assume a much moderate and flat growth rate of 20 per cent a year until 2020, the total diesel cars will be double the size of the total car sales today.”

  • The public health imperative of diesel in cities is lost in this estimate. It is clear that even what Indian industry calls ‘clean diesel’ is far from clean in terms of toxicity. Emission data shows that today’s diesel cars, on an average, emit seven times more particulates and three to five times more nitrogen oxides than petrol cars. There is sufficient evidence that tiny particulates – PM 2.5 -- emitted from a diesel vehicle are toxic and carcinogenic. This must be accounted for in any calculation of the costs of diesel in the economy.

  • Globally, tax measures are used to discourage diesel cars: In Brazil, diesel cars are banned. In Denmark, diesel cars are taxed higher to offset the lower prices of the fuel. In China, taxes do not differentiate between petrol and diesel, while Sri Lanka uses taxation to discourage diesel cars and has reversed the dieselisation trend and diesel fuel consumption in its transport sector.

What CSE demands

  • Additional duty on diesel cars to offset the revenue and public health losses: The Kirit Parikh Committee has proposed Rs 81,000 additional excise duty as an equaliser. While this amount should be imposed on cars with engines less than 1400 cc the amount should be doubled for the large segment (the luxury cars which use up more fuel) for more equitable sharing of burden.

  • Use the additional revenue to fund production of clean diesel with 10 ppm sulphur to make a quick transition to Euro V/VI emissions standards.

  • Lower taxes on buses to help strengthen public transport and control car growth. 

For more on this, please contact Vivek Chattopadhyay of CSE’s air pollution team at, or call him at 9911791243.

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