The government, after proposing the budget, has announced plans to come down hard on gas guzzling vehicles. The government will impose higher taxes on manufacturers of vehicles with low fuel efficiency. An additional 8 percent excise duty will be levied on vehicles with efficiency below 90 percent of the overall average. The excise duty would increase to an additional 24 percent as the fuel economy drops. The government is also planning to give incentives to manufacturers of cars with high fuel economy and low pollution rates.

A committee consisting of top officials from various ministries of the Indian government is chalking out a framework for fuel economy standards. Firstly, the government is considering drawing up an average for each category of cars and other vehicles and set them as standards. The duty will be increased by 8 % in the ongoing 11th five-year plan and 5 percent beyond the 11th plan.

The committee hopes that the US experience with fuel efficiency norms will be repeated in India. The members estimate that the average fuel economy of new cars, commercial vehicles, and two wheelers will increase by 45 % over the next four years. The committee expects the excise duty structure to bring in better compliance of emission norms by car manufacturers. The plan is to reduce emissions of hydrocarbons and other air pollutants, making urban areas meet ambient air quality standards.

Manufactured cars could be labeled as high or low fuel efficiency vehicles as they roll out of production facilities. The categorization will mainly be based on fuel economy and emission ratings of the car. This would help consumers identify cars with high fuel efficiency easily and make their choice accordingly. It would also help manufacturers of green vehicles promote their product effectively.