Eight carmakers including Hyundai, Mahindra and Mahindra face Rs. 7300

Eight automakers violate fleet emissions standards

In a major development, eight carmakers including Hyundai, Mahindra and Kia may face fines of up to Rs. 7,300 crore for exceeding the corporate average fuel efficiency (CAFE) norms stipulated in the financial year 2022-23. The penalty is a result of the implementation of stricter emission standards by the Union Ministry of Power’s Bureau of Energy Efficiency (BEE).

Hyundai, Mahindra face maximum penalties

Penalties vary widely among the eight carmakers, with Hyundai facing the highest fine of Rs. 2,837.8 Crore, followed by Mahindra at Rs. 2,837.8 Crore. 1788.4 Crore, Kia’s is Rs. 1346.2 Crores. Other carmakers to be penalized include Honda (Rs 457.7 crore), Renault (Rs 438.3 crore), Skoda (Rs 248.3 crore), Nissan (Rs 172.3 crore) and Force Motors (Rs 180 million).

Hyundai’s fine is equivalent to nearly 60% of the company’s Rs. Profit for FY23 was Rs 4,709 crore, highlighting the financial pressure that fines may put on the automaker.

Introducing stricter CAFE regulations in fiscal year 2023

The penalties stem from stricter CAFE regulations aimed at regulating fuel consumption and carbon emissions from passenger cars. In fiscal year 2023, BEE requires car manufacturers to meet an average fuel consumption level of 4.78 liters per 100 kilometers and a carbon dioxide emission of no more than 113 grams per kilometer.

These standards are significantly tighter than previous standards, which allowed emissions of up to 5.5 liters per 100 kilometers and CO2 emissions of 130 grams per kilometer. The updated norms aim to reduce dependence on oil and curb air pollution by pushing automakers to produce low-emission vehicles, including electric, hybrid and compressed natural gas vehicles.

Industry resistance to fine calculation

Automakers have expressed concerns over the calculation of penalties, arguing that the stricter penalty norms will only come into effect on January 1, 2023. Therefore, they believe that a penalty based on sales volume for the entire fiscal year is inappropriate. The automotive industry is currently in discussions with the government to seek clarity and potentially negotiate penalties.

One senior industry executive described the situation as “ongoing discussions” with the government to resolve differences over compliance timelines and fine amounts.

Compliance testing and reporting delays

The penalties were calculated after accredited laboratories tested models and variants from 18 manufacturers to simulate real driving conditions. Noncompliance is determined based on the total number of vehicles sold by each manufacturer in fiscal 2023.

Despite these findings, the annual fuel consumption compliance report for 2022-23 has been delayed for more than a year and has yet to be released. The delay has also affected the release of the 2023-24 compliance report, although the report is reportedly ready.

Revised law provides for tougher penalties

Initially, non-compliance with CAFE norms under the Energy Conservation Act, 2001 would attract a fine of up to Rs 10 lakh. 10 Lakhs plus reported excess energy cost. However, the December 2022 amendment introduced stiffer fines including Rs. Violations below 0.2 liters per 100 kilometers attract a fine of Rs 25,000 per vehicle. 50,000 per vehicle above this threshold, and Rs. A base fine of 1 million.

Impact on automakers and policy objectives

The penalties underscore growing concerns about environmental sustainability and the push for cleaner vehicle technologies. While tougher norms and penalties are intended to incentivize the adoption of greener vehicles, automakers believe the sudden policy change poses compliance challenges.

As discussions between the government and the auto industry continue, the outcome could set a precedent for balancing environmental goals with the operational realities of the Indian auto industry. The case highlights the need for clarity and coordination between policymakers and industry stakeholders in achieving long-term sustainability goals.

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