CAFE-2 and BS-VI stage II
Context: Automakers seek relief on new fuel efficiency, emission norms
- Industry has requested the government to defer the implementation of fuel efficiency norms and second stage of emission norms to April 2024, in a bid to keep the cost of acquisition stable.
Pandemic disruption: Seeking more time for transition
- Shifting to Corporate Average Fuel efficiency (CAFE-2) regulations and BS-VI stage II would not only become more difficult for the auto industry amid the pandemic-led disruption but also raise cost of acquisition.
- In the current sales scenario, a further rise in acquisition costs for consumers could add to the concerns.
- The primary reason for that has been the sharp rise in cost of acquisition of cars in India.
- Almost 50 per cent of the car buyers in India are first-time buyers and since price elasticity for car purchase is high in India, it is a major factor for slowdown in growth
- In European markets, the transition from Euro 4 to Euro 6 took 9 years, but in India the shift happened in just a period of three years and since all the cost is passed on to the consumer, it takes up the acquisition cost significantly.
- Besides, high tax rates and rising service tax and insurance cost has also taken the acquisition cost higher for customers.
- The CAFE-2 norms that aim to make cars more fuel efficient are set to come into effect in 2022 and BS-VI stage II norms are set to come into force beginning April 2023.
What is CAFÉ norms?
- CAFE or Corporate Average Fuel Efficiency/Economy regulations are in force in many advanced as well as developing nations, including India.
- They aim at lowering fuel consumption (or improving fuel efficiency) of vehicles by lowering carbon dioxide (CO2) emissions, thus serving the twin purposes of reducing dependence on oil for fuel and controlling pollution.
- Corporate Average refers to sales-volume weighted average for every auto manufacturer.
- The norms are applicable for petrol, diesel, LPG and CNG passenger vehicles.
- CAFE regulations in India came into force from April 1, 2017. Under this, average corporate CO2 emission must be less than 130 gm per km till 2022 and below 113 gm per km thereafter.
Why is it important?
- Global automakers are betting big on India as vehicle penetration is still low here when compared to developed countries.
- At the same time, pollution caused by the ever-increasing number of vehicles on road is worsening the air quality in many cities.
- Upgrading to stricter fuel standards is one way to tackle air pollution.
- CAFE regulations assume importance in the light of their ability to reduce the carbon footprint of the auto industry.
- The National Auto Policy (draft) put out in early 2018 calls for developing a roadmap for reduction in CO2 emissions through CAFE regulations.
- It calls for defining corporate average CO2 gm per km targets for all passenger vehicle manufacturers from 2020 and aspires to match Indian CO2 reduction targets to those set by developed countries by 2025.
- The Auto Policy also contemplates economic penalties for manufacturers who do not meet corporate average targets and envisages a system where credits under the scheme (for achieving better than mandated fuel efficiency) can be banked and traded.
- Stricter CAFE targets can also lead to manufacturers moving to electric or strong hybrid vehicles over the medium to long-term to comply with the norms.
- Alongside the implementation of the BS VI emission norms and the plan to shift to mass use of electric vehicles by 2030, the CAFE regulation is one of the steps taken by the government to breathe cleaner air.
- While CAFE regulations focus on reducing CO2 emissions, BS VI focusses on other harmful exhaust from vehicles.
- The BS IV-compliant fuel currently in use has 50 parts per million (ppm)
- But BS VI stipulates a low 10 ppm. Besides, under BS VI, particulate matter emission for diesel cars and nitrogen oxide levels are expected to be substantially lower than in BS IV.
- A mass shift to electric vehicle use will also bring down air pollution substantially.
- To encourage manufacture and sale of electric vehicles, the government is already providing incentives under FAME (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles) scheme.
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