Picture Courtesy: Financial Express
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SC BS-III vehicle ban Automobile manufacturers industry BS-IV

New Delhi: Delivering a major blow to automobile industry, the Supreme Court (SC) has upheld the deadline for the ban on sale or registration of Bharat Stage 3 or BS-III compliant vehicles starting from April 1, 2017. A bench of Justices Madan B Lokur and Deepak Gupta observed that “health of the people is far far more important than the commercial interest of automobile manufactures”. The ban is a part of the initiative to transition to BS-IV and the ruling has come against a petition by auto manufacturers who were seeking relief on sale of existing stock that are not BS-IV compliant.

The ruling has left major automobile makers like Tata Motors, Ashok Leyland and Mahindra & Mahindra, and two-wheeler majors Hero MotoCorp, Honda and TVS with an almost junk inventory worth over Rs 12,000 crore. The companies were also at the receiving end from the dealers as they create ruckus over inventory holding costs and possible defaults in bank loans taken to buy stocks.

The industry estimates suggest that the total value of the impacted 8 lakh vehicles, which includes around 6.71 lakh two-wheelers, 97,000 commercial vehicles and over 40,000 three wheelers, is  between Rs 15,000 to Rs 20,000 crore. The auto companies are hurrying to liquidate stocks and upgrade along with considering export options to minimize the impact.

In the meanwhile, speaking on behalf of the automobile industry on the ban, Vinod K. Dasari, President, Society of Indian Automobile Manufacturers (SIAM) said, "Auto Industry has been ready with BS4 manufacturing since 2010. However, the sale of BS4 vehicles was not possible, nationwide, due to lack of BS4 fuel. Auto Industry is law abiding and is in full compliance with the emission norms set by Government that stipulates date of "Manufacturing". The historical implementation of emission norms also reinforces the current law that stipulates "manufacturing". Auto Industry has had the capability of making BS4 vehicles since 2010, but lack of proper BS4 fuel prevented it from selling such vehicles, nationwide. Running a BS4 vehicle with BS3 fuel can cause severe problems to some vehicles."

A few manufacturers such as Maruti Suzuki and Hyundai had already made the switch to BS IV car models sometime ago. The ban, however, will tremendously impact the ones who were still making that transition.

The industry is also concerned that the ban would impact the commercial vehicles the most based on sizeable inventory levels, potential costs associated with inventory re-call (from dealers) and upgradation to BS-IV norms.