NGT fines Volkswagen: Too little, too late
Such severe penalty should be imposed that it truly becomes a deterrent for the company, so as not to do it again, and for others also
Last week the National Green Tribunal (NGT) imposed a fine of Rs 500 crore on Volkswagen for using the cheat device so that while testing, its vehicles did not show the real emission and showed only what was within the permissible limits. It was a software for which Volkswagen had admitted in 2015 in the United States, and, thereafter, heavy fines have been imposed on the company in several countries in the world. A fine of Rs 500 crore, which has been said to be exemplary by NGT simply does not make any sense – definitely not been exemplary in any way – as this decision can be said to be too little, too late.
What is the value of Rs 500 crore for a company like Volkswagen? Taking the conversion rate to roughly about Rs 70 to a US dollar, it amounts to roughly $ 70 million. When fines have been imposed on companies in the United States and European Union for violation of competition law or pollution norms or tax evasion or money laundering or causing damage to the environment, etc. the amounts have easily been in billions of dollars. BP, the oil and gas company, has already paid to more than $ 60 billion for causing damage to marine life in coastal areas due to Deepwater Horizon oil spill in the Gulf of Mexico in 2010. Volkswagen owns some of the highly valued marques like Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT, koda, flagship Volkswagen, Ducati motorcycles, MAN and Scania commercial vehicles, etc. It operates almost all over the world and had toppled Toyota in 2016 to become the world's largest automobile maker. The on-road price of Bugatti Veyron – 16.4 Grand Sport, Petrol, Base Model – in Delhi is just a little less than Rs 14 crores, and of Bugatti Chiron – Sport, Petrol, Base Model – in Delhi is just a little more than Rs 24 crores. The top end Ducati motorcycle is available in Delhi for a little more than half a crore. This is just to give a glimpse of what type of money the company is dealing with.
With this much understanding of the company, one can imagine the value of Rs 500 crore for Volkswagen. Sou. A red cent. Chicken feed. Peanuts. Pittance. So, in all probability what will the company do? Simply pay and put it behind its back. Wrong. It will appeal, as it has already stated, and the matter can linger on for years.
An amount of Rs. 100 crore is not even worth mentioning for Volkswagen. But, when NGT had directed Volkswagen to pay Rs. 100 crore in November 2018, the company simply did not pay and it was only when NGT threatened to get its directors arrested, and by that time the matter had already reached the Supreme Court, the company deposited the amount. NGT appears to be a toothless tiger with the imposition of fines which are so ridiculously low that there is hardly any impact on the company. NGT says that some of Rs 500 crores shall be used for improving the air quality in the National Capital Region and other highly polluted areas. What a joke! When Enforcement Directorate (ED) had seized a Lutyens' bungalow at Prithviraj Road – owned by an engineer from Uttar Pradesh – in 2014, its market value was stated to be about Rs 400 crore. In 2019, it would not be possible to buy even a single bungalow for Rs 500 crore and NGT thinks of improving the air quality of the entire NCR with this money. Highly unrealistic and ludicrously simplistic!
One is compelled to ask why practical and realistic fines are not imposed which really make a dent? Tokenism doesn't work in the long run and when tribunals are dealing with multinational companies, the yardstick applied for imposing the fines cannot be related to the per capita income in India. Global standards must be followed. Damaging the environment intentionally cannot be pardoned and the company should not be allowed to escape so easily. Such severe penalty should be imposed that it truly becomes a deterrent for the company, so as not to do it again, and for others also.
Otherwise, it will always be the case with NGT — quantum of fine: extremely low; impact: zilch.
The author is a professor at IIM-A, akagarwal@iima.ac.in