Transport sector is the largest user of oil – nearly half of the total consumption, and is poised to make India’s oil security even more precarious. Asian Development Bank projects that the total fuel consumption of on-road vehicles in India in 2035 can be six times over that of 2005 level. Explosive growth in personal vehicles and steady shift of freight transport from railways to roadways will incite ravenous appetite for energy. While the Automotive Mission Plan that aims to expand the auto hub in India does not link the new investments with stringent fuel efficient and clean emissions targets. It is indefensible that the government should be so willing to forego public revenue to support car industry that has no legal obligation to meet fuel efficiency standards.
So far, ironically because of lower level of income thresholds, the Indian market has favoured small cars and two wheelers. As small engines use less fuels the average fleet-wide fuel consumption is expected to be low. But already, with rising income levels there is steady shift towards bigger cars that use more fuels. Taking their place are the bigger cars in compact, mid size and high end segments. Therefore, standards can make a significant difference in India.
Worldwide fuel efficiency standards are crafted by the governments to benchmark improvement in efficiency levels of the vehicle technologies, provide a level playing field for companies to compete fairly with each other and allow consumers to compare models on the basis of fuel economy levels while shopping.
Fuel economy improvement will also help the Indian industry, which is aiming to globalize, to become more competitive. The societal benefits in terms of fuel savings can be enormous. Also the ancillary benefits from the avoidance of green house gas emissions escalation will be significant. Without fuel economy regulations there can be steady increase in size, weight, and power of vehicle fleet as has been noticed in other countries and also in India. While technology is advancing rapidly in other regions, there is huge potential for rapid diffusion of improved technologies if regulatory standards are in place in India.
Given the imperative of energy security in India regulating fuel economy levels of the vehicles will help to achieve substantial fuel savings. This tangible benefit can help to enlist public support for the regulations. Consumers are more sensitive to changes in fuel economy levels of the vehicles in India. Fuel economy regulations will also give ancillary benefit of reducing heat trapping carbon dioxide emissions for climate benefits. Setting mandatory standards is most important as the voluntary efforts make compliance more uncertain especially when industry begins to increase the power and performance of the vehicle that affects overall fuel efficiency of the fleet. Voluntary system has not worked anywhere in the world. Standards should be legally enforceable.
The government, therefore, should take immediate steps to give an early deadline to implement fuel economy standards for cars, and introduce an official fuel economy labelling programme. Otherwise, policy inaction will amount to state-sponsored fuel guzzling. If the target of improving fuel efficiency by 50 per cent, as envisaged by India’s energy policy, is achieved by 2030-31, India can save 65 per cent of its total current consumption and reduce CO2 emissions equal to removing seven million of today’s four-wheelers.