Big Auto, Govt Eye ₹4.5 Trillion Windfall From Delhi’s Fuel Ban For Old Vehicles: GTRI

Delhi’s fuel ban on older vehicles, due to start from July 1, 2025, is poised to deliver a windfall for large automakers, importers, and government tax collections. The ban, however, risks imposing harsh costs on small businesses, informal sector workers, and middle-class families who still rely on older vehicles for mobility and livelihoods, according to thinktank Global Trade Research Initiative.

Under the new policy, diesel vehicles older than 10 years and petrol vehicles older than 15 years will no longer be allowed to refuel at any petrol pump across the capital. Automated number-plate recognition cameras installed at fuel stations will enforce the rule by linking to the VAHAN database.

The ban will affect an estimated 1.8 million four-wheelers and 4.4 million two-wheelers in the National Capital Region, which extends beyond Delhi into key urban centres like Noida, Gurugram and Ghaziabad.

According to GTRI if 1.8 million old vehicles are replaced by new cars with an average price of ₹1.5 each, the total turnover for the auto industry would amount to ₹2.7 trillion. The Central government would collect about ₹1.35 trillion from GST and compensation cess, while the Delhi state government would gain around ₹421.87 billion from road tax and diesel surcharges.

Combined, this would generate a fiscal windfall of nearly ₹1.77 trillion for the government. Thus, the replacement drive would deliver a dual benefit — a ₹2.7 trillion boost for the automobile industry and ₹1.77 trillion in fresh tax revenues for the Centre and Delhi state, said GTRI. Real values will be at least 50% higher as this data ignores the revenue to be collected on account of replacement of 4.4 million two-wheelers.

Some experts have questioned the move to ban the fuel supply rather than relying on Pollution Under Control certificates

The government has justified the move on air quality grounds, rejecting calls to rely on existing PUC certificates, which officials say are outdated and easily manipulated.

In most major countries, there is generally no outright national ban on older vehicles based purely on age. Instead, governments use a mix of stricter emissions standards, roadworthiness checks, and economic disincentives to phase out old, high-polluting vehicles. In the United States, there is no federal age limit, but many states, particularly California, enforce stringent emissions inspections, such as the “Smog Check”, which makes it difficult for older vehicles to stay on the road unless they are very well maintained.

In Europe, while there is no uniform age ban, cities like London, Paris, and Berlin operate low-emission zones or ultra-low emission zones that either ban or charge heavy fees on older diesel and petrol vehicles that do not meet the latest Euro standards, GTRI said. 

This has led to a gradual removal of old cars from urban areas. Germany requires all cars over three years old to pass rigorous roadworthiness and emissions tests every two years.

In India, by contrast, the blanket age-based ban will help the auto sector. With domestic car sales slowing, down 6.77% year-on-year in June 2024, and with full-year growth at a four-year low of just 4.2%, the ban will clearly drive replacement demand for new vehicles. Importers, too, will benefit. India’s recent free trade agreements have lowered tariffs on imported cars, making foreign brands more competitive.

Yet MSMEs, informal transporters, and many middle-class families will be hit the hardest. With no meaningful scrappage incentives and no clear options to transfer older vehicles outside NCR, owners may be forced to junk otherwise usable vehicles. A ₹500,000 small diesel van used by a carpenter or trader may now be rendered worthless overnight.

GTRI said that if India hopes to modernise its vehicle fleet without crushing the poor, it must adopt the best practices of Europe and the US — build rigorous, transparent emission-testing systems and phase in green zones rather than impose a blanket age cut-off. 

The worry is that the Delhi experiment may soon be extended to other parts of country, making it even more urgent to develop a fairer, more science-based approach, said GTRI Founder and Trade Expert Ajay Srivastava. The debate over whether “old equals dirty” will now play out on Delhi’s roads, with wider national implications for both equity and environmental policy, he said.