Haste makes waste

Haste makes waste

Niti Aayog’s proposal to transition to electric vehicles through a ban is a poor idea.

Air quality in large parts of India is poor. Clean air is a public good and initiatives towards that end deserve support. However, even in the pursuit of this public good, policy makers cannot afford to ignore a core economic principle: trade-offs. That, however, is what government’s thinktank Niti Aayog is doing in its desire to bring about a ban by April 2025 on sale of two wheelers below 150cc running on internal combustion engines. Niti Aayog’s concerns are not misplaced but its proposal is poorly thought out. There are better ways of achieving its objectives.

Tailpipe emissions of vehicles have over time been subjected to stringent standards. By next year, the vehicle industry will transition to a higher level, BS VI. A highlight of the Indian two wheeler industry’s transition to more stringent emission standards is that it has been led by domestic companies. India is perhaps the only market where local companies have successfully competed against Japanese firms in the commuter segment. Therefore, it’s reasonable to expect Indian industry to meet more stringent tailpipe emission standards. But what’s unreasonable is to hasten the transition to electric vehicles by using such a crude tool as a ban.

Electric vehicles are indeed the future. At this moment however the technology is still at an early stage of development. The dominant battery technology is lithium-ion and Chinese and South Korean companies are among the key manufacturers. Its lack of competitiveness is brought out by the huge subsidy that the Chinese government has to provide to encourage electric vehicle sales there. One way of looking at it is that electric vehicles still cannot compete against those powered by combustion engines in mass market segments.

Niti Aayog vice-chairman Rajiv Kumar has invoked “national interest” in pushing for the ban. A premature move to electric vehicles will not only have an adverse impact on the large ecosystem supporting the two-wheeler industry, it will hand over a bright spot in Indian manufacturing to Chinese firms, among others, on a platter. Is that in national interest? Niti Aayog can contribute to the cause of cleaner air by first coming out with a rigourous study on the sources of pollution in different parts of India. This can be the foundation of sensible policy making. A ban is an unthinking approach to a tricky challenge.