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Diesel vehicle owners found themselves in a state of confusion recently when Nitin Gadkari, the Union road transport minister urged them to consider shifting away from diesel and petrol-powered cars. He warned that if they persisted with these traditional fuels, he might propose an additional 10% GST on such vehicles, labelling it a “pollution tax.” However, Gadkari clarified that there is currently no concrete proposal in this regard, though it aligns with the government’s broader strategy of promoting cleaner and more sustainable fuel options due to the rising sales of automobiles.

Nevertheless, Gadkari’s musings had immediate consequences as automobile stocks took a nosedive, even though no official decision had been made thus far.

The apprehension about plummeting auto stock prices was not entirely unfounded. Investors in the stock market were aware of a recommendation made by a committee within the Ministry of Petroleum and Natural Gas, which suggested a ban on diesel cars in cities with a population exceeding one million by 2027.

Diesel-run vehicles are already subject to a 28% tax and additional levies, depending on engine capacity, further inflate the tax burden, pushing it to nearly 50%.

The government’s aversion to diesel can be primarily attributed to its commitment to curbing greenhouse gas emissions. Additionally, there is a national goal to generate 40% of electricity from renewable sources, ultimately achieving net-zero emissions by 2070.

Diesel consumption accounts for a significant 40% of the nation’s petroleum fuel consumption. The transport sector is responsible for 87% of diesel sales, with states like Uttar Pradesh, Maharashtra, and Haryana contributing significantly to these figures.

It is noteworthy that Maruti Suzuki, the largest car manufacturer in the country, ceased production of diesel vehicles on April 1, 2020, and has no intentions of re-entering the diesel segment. Likewise, companies like Mahindra, Honda, and Tata Motors have ceased manufacturing 1.2-liter diesel engines, signalling a broader industry shift.

One of the major drawbacks of diesel engines compared to petrol is their increasing emission of oxides and nitrogen (NOx). The Volkswagen scandal in 2015 exposed the practice of car manufacturers manipulating emission control during laboratory tests while emitting significantly higher NOx levels during actual driving, which significantly tarnished the reputation of diesel engines.

Furthermore, the introduction of the new BS-VI emission norms from April 1, 2020, and the substantial costs associated with upgrading diesel engines to meet these standards forced car manufacturers to announce their exit from the diesel segment. The government’s decision to tighten emission norms rendered diesel vehicles economically unviable for carmakers.

However, diesel remains the preferred choice for heavy vehicles due to its superior fuel economy compared to petrol, primarily because it offers higher energy per litre, and diesel engines are inherently more efficient.

Nevertheless, the landscape has evolved, and by 2021-22, diesel cars accounted for less than 20% of passenger vehicle sales, reflecting a shift in consumer preferences and environmental concerns.