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From 58% to 17% market share: Why Indians don’t like diesel cars anymore

When diesel was Rs 20-25/litre cheaper than petrol in 2012-13, cars running on it accounted for 58% of the market. Now, people buy less polluting options, and experts welcome it.

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New Delhi: Less than a decade ago, there were as many diesel cars on Indian roads as petrol cars. In fact according to data from the Society of Indian Automobile Manufacturers (SIAM), diesel passenger vehicles (PVs) had a 58 per cent market share in the fiscal 2012-13, the highest proportion ever. The cheaper cost of diesel compared to petrol made consumers disregard the fact that the former causes more pollution than the latter. At the time, on average, diesel used to cost about Rs 20-25 less per litre than petrol.

But now, with that difference down to Rs 7-9 per litre, according to an analysis of government data, the market share of diesel PVs has dropped to just 17 per cent in the fiscal year ending March 2021, SIAM data shows. This has had an unintended but desirable consequence — that consumers are opting for cleaner options like petrol, compressed natural gas (CNG), and electric and hybrid cars.

The fall of diesel PVs’ market share occurred after the Narendra Modi government deregulated fuel prices and ended subsidies, soon after coming to power in 2014.

The move was contrary to policy making through the previous two decades, as the government sought to prompt consumers to shift to cleaner alternatives and to reduce its own financial burden. The impact of those policy calls is now visible.

According to experts, as India moves to a better emission standards regime over the next few years, this trend is here to stay.

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Policy battle against diesel

India has fought a long battle against diesel vehicles, which started about three decades ago.

In the 1990s, following years of industrialisation, national capital Delhi had become one of the most polluted cities in the world. The situation was so grave that a doctor could judge a person as a dweller of the city just by looking at their “blackish lungs”, environmental advocacy magazine Down To Earth reported in 1996. 

In the middle of that decade, following a PIL by environmental activist M.C. Mehta, the Supreme Court took drastic steps to curb pollution, and the axe fell on public transportation running on diesel first. 

Following the SC order issued on 28 July 1998, all Delhi Transport Corporation (DTC) buses that were running on diesel were converted to CNG. By December 2002, diesel buses had disappeared from the city. Autorickshaws too had been upgraded to CNG.

In 2016, the top court announced that only CNG taxis would run in Delhi, making an exception for diesel taxis running with an All India permit.

Deregulation and its impact

Until 2014, diesel was subsidised for several reasons — it was used by farmers to run tubewells, by industries to run machines, and freight and heavy commercial vehicles for transport.

The benefit of the subsidies was also enjoyed by private vehicle owners, who, according to the Ministry of Petroleum and Natural Gas, formed about 13.1 per cent of the total diesel consumers by 2012-13.

However, after the Modi government came to power, it ended subsidies and left the pricing of fuel to the markets. This proved to be a major jolt to diesel prices, which have been racing up and are now within touching distance of petrol.

Diesel prices in Mumbai crossed the Rs 100 per litre mark Saturday, touching Rs 100.66 Sunday, while petrol was at Rs 110.12.

The life of diesel cars on Indian roads was also curtailed in 2015 by the National Green Tribunal (NGT), which barred diesel cars older than 10 years from plying in the national capital.

The latest National Scrapping Policy launched this year also aims to eliminate old and unfit vehicles from plying on India’s roads.

With effect from 2020, all new cars also had to comply with Bharat Stage VI emission standards, increasing the gap between the production cost of diesel and petrol cars, disturbing the economics for the makers.

India’s biggest car manufacturer, Maruti Suzuki, quit diesel manufacturing in 2020-21. Most companies in India have stopped releasing smaller diesel cars.

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Changing scenario

The high cost, low availability and low shelf life of diesel cars is making the customers switch to cleaner fuel options.

In many bigger SUVs, diesel continues to be the preferred option, but the trend is changing significantly in the small car segment.

The break-up of non-diesel passenger vehicles for the last couple of years reveals that most consumers are now shifting to petrol cars, according to SIAM data. Previous years’ data doesn’t provide a break-up of the segment.

Between 2019-20 and 2020-21, the share of diesel cars in the market fell from 29.5 per cent to 17 per cent while the share of petrol cars rose from 66 per cent to 76 per cent. CNG cars, running mainly in big metros, jumped from 4 to 6 per cent. The share of electric and hybrid vehicles also rose marginally.  

What experts say

According to Vivek Chattopadhyaya, senior programme manager, air pollution control unit at the think-tank Centre for Science and Environment, which runs Down to Earth magazine, the change is welcome, but more steps are needed to reduce vehicular pollution.

“Much of the change will be visible when we graduate to Bharat Stage 7 norms (in the medium term), which would strive to bring fuel neutrality…” he said, referring to the future norms currently under discussion, which would make the emissions from petrol and diesel vehicle equal. 

This would also affect consumers’ desire for diesel PVs.

However, norms can only reduce the vehicular emissions committed by private vehicle owners, he said, adding that a lot of investment is needed in public transportation in non-metro cities if the government is serious.

According to the 2018-19 annual road transport figures shared by the Ministry of Road Transportation and Highways, India had one bus for every 1,000 people, while the corresponding figures were 10 per 1,000 for Indonesia and 17 for South Korea. 

“At present, a dedicated network of public transportation systems is mostly limited to metro cities, which do not cater to a large chunk of our population. If the government is serious about reducing pollution, then it needs to invest in buses that can replace 50-60 cars from roads, even if they run on diesel,” Chattopadhyaya added.

(Edited by Amit Upadhyaya)

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