New Delhi, Aug 12 (Agencies): The Supreme Court on Friday allowed the registration of large diesel vehicles with an engine capacity of 2000cc or more in Delhi and the National Capital Region, as long as a one per cent “green” tax is paid.

The news was welcomed by the auto industry after a series of lower court rulings banned diesel vehicles, both new and old, on concerns that their exhaust fumes were contributing to Delhi's deepening air pollution crisis.

Harish Salve, a lawyer connected to the case, said the court would decide later whether to impose the so-called green cess on diesel vehicles with smaller engines, Salve said.

The Supreme Court had temporarily banned the sale of large diesel cars in Delhi last year and said it was mulling the additional tax, potentially hitting the sales of carmakers such as Toyota Motor Corp, Mahindra & Mahindra and Tata Motors.

Pravin Shah, CEO of Mahindra & Mahindra Motor, welcomed the Supreme Court ruling in comments to financial news channel CNBC-TV18.

In a recent ruling, the National Green Tribunal had ordered the authorities to remove all diesel vehicles over 10 years old from the capital's streets.

Court-ordered restrictions on diesel vehicles, which experts say cause worse air pollution than other engine types, are often contradictory and poorly enforced in India, leading the industry to complain over lost sales and high compliance costs.

The apex court had earlier agreed to hear the plea of luxury car maker Mercedes-Benz offering to pay one per cent environment cess in a bid to overcome the ban on registration of vehicles with engine capacity of 2000cc or more in Delhi and the NCR.

Mohan Parasaran, senior advocate and former solicitor general, who had appeared for Mercedes, had said the company has offered to pay one per cent of the ex-showroom price of these cars as green cess on being permitted to resume sales in Delhi and NCR.

On July 4, the court had reserved its verdict on pleas seeking modification of its order banning registration of diesel-run SUVs and high-end cars with engine capacity of 2000cc and above in Delhi and NCR, indicating that such vehicles may be allowed to be registered again on payment of one per cent of ex-showroom price as green cess.

The Ministry of Heavy Industry and Public Enterprises, which supported the automobile giants' bid for modification of the order, had, however, opposed the court-mandated imposition of green cess on buyers of big diesel cars and SUVs.