Covid-19 cloud hangs over BS-VI gear shift as March 31 deadline looms

India’s transition to more stringent automobile emission norms from April 1 has been clouded by the coronavirus disease (COVID-19) outbreak, but any decision to extend the deadline can only come from the Supreme Court.

A senior government official told Business Standard that the government would consider an extension only on the apex court’s directions.

Federation of Automobile Dealers’ Association (Fada) and a couple of two-wheeler manufacturers — including market leader, Hero MotoCorp, and Honda Motorcycle and Scooter India — had last week petitioned the court seeking an extension of the deadline for shifting to the Bharat Stage (BS)-VI emission norms in the wake of COVID-19, as automobile companies could not sell BS-IV inventory in March. The matter has so far not been listed for hearing.

Dealers are hoping their petition will be heard this week, though sources said it was unlikely to come up before March 31. The Supreme Court had on March 13 curtailed hearings because of COVID-19 and announced that it would hear only urgent matters. In February, the court rejected a plea for extension, following which Fada asked dealers to sell remaining stock of BS-IV vehicles by March 31.

According to CRISIL’s estimates, passenger vehicle dealers have unsold stock of two to five days, light commercial vehicles of four to eight days, medium and heavy commercial vehicles of up to four days, and two-wheeler makers of 12-16 days.

However, automobile manufacturers are divided over this proposal.

Speaking to Business Standard, Rajiv Bajaj, managing director and chief executive office of Bajaj Auto, said, “Automakers should not have produced BS-IV well into February. They need to put out strong promotions to liquidate what is left and if there are unsold stocks on April 1, they should reimburse their dealers and take back those vehicles for export or scrapping.”

On October 24, 2018, the Supreme Court had upheld the government order that no motor vehicle conforming to the older BS-IV emission norms could be sold or registered in the country from April 1, 2020.

Fada on December 18, 2019, petitioned for an extension of the last date because of the financial hardships faced by firms as a result of the economic slowdown. It sought one extension by a month to clear BS-IV inventory. Hetal Gandhi and Pushan Sharma, analysts at CRISIL Research, expect COVID-19 to “land a double whammy on the sector”. First, earlier-than-anticipated closure of RTOs could lead to unsold BS-IV inventory. And second, lower-than-anticipated retail sales would result in higher-than-normal BS-VI inventory for large OEMs at the start of fiscal.

Under a government notification dated February 20, 2018, a sub-rule was inserted in Rule 115 of the Central Motor Vehicle Rules, 1989, which said new motor vehicles conforming to BS-IV manufactured before the April 1, 2020, shall not be registered after the June 30, 2020.

An extension for registration till September 30, 2020, was given for BS-IV vehicles manufactured before the April 1, 2020, and sold in the form of drive-away chassis.

The October 2018 court order said manufacturers were not willing to comply with the March 31, 2020, deadline not because they do not have the technology but because the use of technology will lead to increase in the cost of the vehicles   which may lead to reduction in sales of the vehicles and ultimately their profit.

“There can be no compromise with the health of the citizens and if one has to choose between health and wealth, keeping in view the expanded scope of Article 21 of the Constitution, health of the teeming millions of this country will have to take precedence over the greed of a few automobile manufacturers,” the SC had said.