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With the rising cost of oil imports putting pressure on the country's finances, the government plans to give carmakers a three-year window till 2017 to meet the new fuel efficiency standards that are slated to be announced in the next few months.
After this grace period, companies may not only face penalties for non-compliance, but could have to stop manufacturing completely.
"Car companies have already been informed of the fuel efficiency norms and they have time till 2017 to make the changes. Those who are not able to meet these standards will have to stop manufacturing as their vehicles cannot be registered on Indian roads, much like what is followed in case of emission norms, a senior official in the ministry of road transport and highways (MoRTH) told FE.
However, the auto industry feels that three years is a very tight timeframe for carmakers, given the huge investment and time needed for new platform and engine development. In fact, car prices could rise 10-15% after the fuel efficiency norms are enforced. "Small companies will fare the worst in getting access to expensive high-end technology to meet the new norms. It is not easy to meet these requirements in India as we cannot introduce low-friction tyres because of bad roads and there is limited scope to use smaller engines with turbochargers like Europe because our engines are already much smaller, a Siam official said.
Another industry executive added that in a price-sensitive market like India, very few buyers would look to pay a premium for new technology and utlimately sales could suffer.
The fuel efficiency norms has been designed by the Bureau of Energy Efficiency (BEE), ministry of power, as a corporate/fleet average system similar to the standards in Europe. A fixed formula would decide the fuel efficiency target for each company based on the average weight of its entire fleet. Those in the heavier categories will thus have a more relaxed fuel economy target to meet, but those with lower average weight for the fleet will find it more stringent.
The final implementation of the norms will be under the Motor Vehicles Act (1988), which is under the MoRTH. Initially, the target had been to announce a fuel efficiency labelling system in April this year for easy understanding by consumers, followed by a five-star rating system for cars (based on efficiency) similar to airconditioners and refrigerators.
"The norms got delayed because the auto industry had issues with how we had designed it. There is a cost to improvement, which the industry may not be comfortable with. It's a combination of two acts, the Energy Conservation Act and the MVA, so its takes time for two ministries to work in tandem, the BEE official further said.
The MoRTH official added, "We got the final details from the BEE a week ago and are now working on it. We should issue the draft notification soon after consultation with the law ministry. After getting the views of several stakeholders and public comments, we will notify the final norms over the next few months.
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