Eight automakers violating fleet emission norms
In a significant development, eight car manufacturers, including Hyundai, Mahindra and Kia, are facing potential penalties amounting to Rs. 7300 crores for exceeding mandated Corporate Average Fuel Efficiency (CAFE) norms in the financial year 2022-23. The penalties are the result of stricter emission standards introduced by the Bureau of Energy Efficiency (BEE) under the Union Ministry of Power.
Hyundai and Mahindra Face Largest Penalties
The penalties vary significantly across the eight automakers, with Hyundai facing the highest fine of Rs. 2837.8 crores, followed by Mahindra at Rs. 1788.4 crores and Kia at Rs. 1346.2 crores. Other carmakers penalised include Honda (Rs. 457.7 crores), Renault (Rs. 438.3 crores), Skoda (Rs. 248.3 crores), Nissan (Rs. 172.3 crores) and Force Motors (Rs. 1.8 crores).
The penalty for Hyundai represents nearly 60% of the company’s Rs. 4709 crore profit in FY23, highlighting the financial strain the fines could impose on automakers.
Stricter CAFE Norms Introduced in FY23
The penalties stem from stricter CAFE norms, which aim to regulate fuel consumption and carbon emissions from passenger vehicles. In FY23, the BEE required carmakers to meet fleet-wide average fuel consumption levels of 4.78 litres per 100 km and carbon dioxide emissions not exceeding 113 grams per km.
These standards marked a significant tightening from previous norms, which allowed up to 5.5 litres per 100 km and 130 grams of CO2 per km. The updated norms aim to reduce oil dependency and curb air pollution by pushing automakers toward the production of low-emission vehicles, including electric vehicles, hybrids and compressed natural gas vehicles.
Industry Pushback Over Penalty Calculations
Automakers have raised concerns over the penalty calculations, arguing that the stricter penalty norms only took effect on 1st January, 2023. As such, they contend that penalties based on the entire financial year’s sales are inappropriate. The auto industry is currently in discussions with the government to seek clarity and potentially negotiate the penalties.
A senior industry executive described the situation as “an ongoing discussion” with the government to resolve differences over compliance timelines and penalty amounts.
Compliance Testing and Reporting Delays
The penalties were calculated after testing models and variants from 18 manufacturers at accredited laboratories to simulate real-world driving conditions. Non-compliance was determined based on the total number of cars sold by each manufacturer in FY23.
Despite these findings, the Annual Fuel Consumption Compliance Report for 2022-23 has been delayed by over a year and remains unpublished. This delay has also impacted the release of the 2023-24 compliance report, even though it is reportedly ready.
Stricter Penalties Under Amended Law
Originally, non-compliance with CAFE norms under the Energy Conservation Act, 2001, carried a penalty of up to Rs. 10 lakh plus the cost of excess energy reported. However, amendments in December 2022 introduced more stringent fines, including Rs. 25,000 per vehicle for non-compliance below 0.2 litres per 100 km and Rs. 50,000 per vehicle for exceeding this threshold, alongside the Rs. 10 lakhs base penalty.
Implications for Automakers and Policy Goals
The penalties highlight the growing focus on environmental sustainability and the push toward cleaner automotive technologies. While the stricter norms and penalties are intended to incentivise the adoption of greener vehicles, automakers argue that abrupt policy changes pose challenges for compliance.
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 India’s automotive sector. The case underscores the need for clarity and alignment between policymakers and industry stakeholders in achieving long-term sustainability targets.
