The National Green Tribunal (NGT) on Monday ordered the Kerala government to stop registering diesel vehicles with engine capacity of 2,000cc and above, except public transport and local authority vehicles. The first such ban was imposed in NCR by the Supreme Court in December last year, severely impacting companies such as Toyota and Mercedes Benz.

“The state of Kerala shall not register any diesel vehicle with the capacity of 2,000cc and above, except public transport and local authority vehicle,” the NGT order said.

Executives of Toyota, Mahindra & Mahindra and Mercedes did not comment on the development. An official of industry body the Society of Indian Automobile Manufacturers (Siam) also declined to comment.

Toyota and Mercedes have seen their sales in NCR go down after the ban. Mahindra had introduced a 1,990cc diesel engine for its popular models to bypass the ban.

Speaking on the condition of anonymity, an industry executive said the order was “shocking” and expressed apprehension that the Kerala ban could be a precedent for more states. Public interest litigations against diesel vehicles have already been filed in Gujarat and Maharashtra, among others.

The Kochi Circuit Bench of the NGT also barred all 10-year-old diesel vehicles — light and heavy — from plying on the roads of six cities. Thiruvananthapuram, Kollam, Kochi, Thrissur, Kozhikode and Kannur cannot have 10-year-old diesel vehicles after 30 days. “Upon expiry of 30 days from today (Monday), if any vehicle is found to be violating this direction, it would be liable to pay Rs 5,000 per violation, as environmental compensation,” the order said. Funds collected would be used for improving the environment in these cities.

NGT Chairperson Swatanter Kumar, who had ordered a ban on the sale and registration of all diesel cars in Delhi in last December, was part of the Bench. The state government has also been directed to inform the Tribunal about the availability of compressed natural gas in the state to run vehicles.

The NGT order is both negative and positive for the industry. Restriction on 10-year-old vehicles will generate demand for new ones and impact transactions in the second-hand car market. But the ban on registration of 2,000cc vehicles will create further challenges.

Kerala accounts for about seven per cent of the total passenger vehicles sold in the country in a year. A total of 191,275 passenger vehicles were sold in Kerala in the year ended March 31, 2015. Of these, only 26,894 were utility vehicles, according to Siam data. Most of the 2,000cc diesel vehicles would be utility vehicles.

Abdul Majeed, partner with Price Waterhouse, said while banning diesel vehicles above 2,000cc did not improve pollution levels, controlling the population of diesel vehicles seemed to be the intention behind such orders. “This will have severe implications on the business of car makers. I will not be surprised if more cities/states come under such restrictions in future,” he said.