The BS-6 Impact

As per the Supreme Court order no BS-4 vehicles can be sold or registered in India with some exceptions from April 1 2020. All the automobile companies will be allowed to sell BS -6 vehicles only

. This decision was taken to counter the rising pollution due to vehicular emissions particularly in the metro cities. We will look at what is BS-VI, why was this decision important and what impact it had on different industries.

What does BS-VI mean?

BS stands for Bharat Stage which is an emission standard set up by Indian regulatory bodies for checking pollutant levels emitted by internal combustion engine vehicles. Central Pollution Control Board is the devising agency for BS standards who took European regulations as reference standard. 

The higher the BS number, the stricter are the emission norms. These emission norms use the European standard (EURO) as a reference. Bharat Stage 4 came into effect in India from 2010 but it took up to 2016 to enforce it in the entire country. The government to counter the rising pollution announced in 2017 decided to skip the BS 5 entirely and implement BS 6 norms from 1^st April 2020 thus giving the industries a timeframe of 3 years to adapt to the new change. This was a very ambitious and challenging plan as India was the first country to attempt such a big leap and that too in 3 years.

 

Source: Autocar India

With BS 6 in effect NOx, which is the major pollutant will go down by 25% in petrol engines and up to 68 % in diesel engines. Also, we will see a 82 % decline in particulate matter. The fuel produced would be cleaner even than the CNG fuel. However, to implement these low exhaust emissions both the refineries and the automobile manufacturers would have to see some drastic changes.

 

Impact on refineries and oil and gas marketing companies

A BS-6 engine if running on BS 4 fuel will not comply with the emission norms. Hence the need was to first bring BS 6 fuel to market before rolling out the new engines. US $4.3 billion was invested in the state-owned refineries for upgrading technology. A major challenge for the refineries was to complete the technological upgradation along with meeting its annual throughput of 5 million barrels per day and the refineries were able to meet the challenge as most of the fuel outlets started supplying BS 6 fuel before 1 April 2020. The price of petrol and diesel was hiked to recover the expenditure for upgradation.

The upgradation projects resulted in significant work for the engineering, procurement and construction (EPC) companies in India. It also meant employment for both the skilled and unskilled labour and contractors in these areas. Hence the BS 6 upgradation provided a boost to employment, especially in the local areas.

 

Impact on the automobile manufacturers

Technological upgradation of petrol engine vehicles

BS 6 petrol engines are a lot similar to BS 4 engines and they do not need expensive hardware to meet the emission norms. Petrol engines emit far lower Particulate matter and NOx than a similar diesel engine. To meet the BS 6 norms petrol engine vehicles would have to install a larger catalytic converter (an exhaust emission control device that reduces toxic gases and pollutants in exhaust gas from an internal combustion engine) than the one they already use. However, it would lead to increased exhaust back pressure which would reduce fuel efficiency by 3-4%. Also, the throttle response would reduce. Price wise, one can expect a small hike in BS-6 petrol engines in the range of about 3 to 5 %.

Technological upgradation of diesel engine vehicles

Diesel engines have high emission of Particulate matter and NOx. To meet the BS 6 norms, the engines would need a Diesel Particulate filter and Selective Catalytic Reduction (converts nitrogen oxide (NOx) into diatomic nitrogen and water with the help of a catalyst) for NOx treatment. This hardware would result in a huge price hike for diesel engines of about 8-10 % especially for the larger engines and could force them out of the market. Many companies like Maruti Suzuki have already hinted on never launching new diesel engine vehicles due to the high cost of upgradation.

Impact on sales of automobiles

The automobile companies had to clear up their BS 4 stock before the deadline. This meant selling up their BS 4 vehicles by providing large discounts and at low costs, thus incurring huge losses in the procedure. If the automobile manufacturers were not able to sell before the deadline then the only option, they would be left with would be export them to international markets where they can be sold like Nepal and Africa. But it goes without saying that this step will of course come with additional costs. Or they could stock them and sell them for spares but some of the parts may directly go to waste. They may also update the BS 4 vehicles to BS 6 but it does not seam feasible mainly due to the technological constraints.

Impact of Covid -19 pandemic

The Supreme Court extended the deadline up to April 10th , permitting the sales for 10 days after the first phase of lockdown. The Federation of Automobile Dealers Associations (FADA), seeked relaxation on this deadline. As per Federation of Automobiles Dealers Association (FADA), BS 4 inventory worth of 6400 cr remained unsold before the deadline which consisted of 1,05,000 two-wheelers, 2,250 passenger cars and 2,000 commercial vehicles In a plea before the court, the association urged the court to extend the deadline for the sale of their unsold inventory, as the sales have gone dead amid coronavirus scare besides the ongoing economic slowdown in the country.

However, the Supreme court on 31st July rejected the plea and asked the dealers to return unsold inventory to the manufacturers so as to export them to other countries.

While the BS 6 upgradation may be a boon for the environment but we cannot neglect the hardships the refineries and automobile industry had to face amid this lockdown.