NITI Aayog is advocating for the phasing out of diesel vehicles in India, pushing for a greater emphasis on cleaner technologies to achieve net-zero emissions in the transport sector. This recommendation is part of a larger effort to align India's automotive industry with global sustainability goals and reduce reliance on fossil fuels.

Key Recommendations and Goals

NITI Aayog's proposals are outlined in its report, 'Scenarios Towards Vikshit Bharat and Net Zero'. The report models a substantial shift towards zero-emission vehicles, projecting a 100% market share for them by approximately 2055 to reach fleet-level emissions tapering to zero by 2070. This long-term vision requires a robust regulatory framework. The plan also aims to increase the share of electric vehicles in India's privately owned cars and two-wheelers to 90% by 2047.

Incentivizing Cleaner Technologies

To achieve these ambitious targets, NITI Aayog suggests incentivizing the adoption of small, lightweight, and fuel-efficient cars under the Corporate Average Fuel Efficiency (CAFE) norms. Promoting smaller vehicles offers benefits such as higher fuel efficiency, lower emissions, and reduced traffic congestion. The organization also recognizes the importance of accounting for the full lifecycle benefits of sustainable biofuels, integrating these cleaner energy sources into the automotive fuel mix to reduce overall carbon footprints. Furthermore, NITI Aayog suggests incentives linked to advancements in battery efficiency, charging speed, and range improvement to drive R&D investments.

Policy Implications for Automakers

This strategy implies a recalibration for the automotive industry, Manufacturers must align their product development and marketing strategies to favor smaller, more efficient, and potentially alternative-fuel-powered vehicles. This is especially critical for bridging the affordability gap for new car buyers, who often transition from two-wheelers and seek value-for-money options. Industry stakeholders need to anticipate policy shifts that will increasingly penalize higher-emission vehicles.

Regulatory Measures and Timelines

Niti Aayog emphasizes the need to "sunset" current relaxations in Corporate Average Fuel Efficiency (CAFE) standards to ensure the regulations remain credible and future-ready. The organization may advocate for moving from an incentive-based regime for EV adoption to clear mandates and even disincentives for fossil fuel vehicles to speed up electrification.

Challenges and Considerations

Despite increasing EV adoption in India, the penetration rate lags behind leading countries like the US, EU, and China. In 2024, India's EV penetration rate was 7.66%, falling short of its target of 30% by 2030. Earlier, NITI Aayog CEO Amitabh Kant had suggested that only electric-powered three-wheelers and two-wheelers with an engine capacity of up to 150 cc should be sold from 2025, with cab aggregators replacing all their diesel and petrol-run vehicles with EVs. While aiming for a complete transition of India as a clean nation, some believe the proposal is visionary but "unrealistic".

Moving Forward

NITI Aayog's vision requires coordinated efforts between private and public actors to increase the manufacturing supply of ZETs and deploy the supporting charging infrastructure. Ambitious policies are required to drive growth, seed the market, and accelerate ZET supply and demand. By modernizing urban fleets and transitioning to cleaner fuels, India can improve air quality and reduce GHG emissions.