The Supreme Court on 29 March imposed a ban on sale of BS-III vehicles from April 1 when the Bharat Stage (BS)-IV emission norms for vehicles will come into force.
The apex court also clarified that no new BS-III registration will be allowed from 1 April onwards.
However, BS-III vehicles sold prior to March 31 will be allowed to be registered, but will need to have proof of sale date.
The apex court said that the auto companies were aware of the notification, yet had decided to sit back.
It added it is important for the industry to move away from commercial losses and focus on environment norms given hazardous pollution condition.
As per the Society of Indian Automobile Manufacturers (SIAM) data, industry has inventory of 8.2 lakh BS-III vehicles. Of this, 96,000 are BS-III commercial vehicles and 6 lakh plus two-wheelers.
The industry also has 40,000 BS-III vehicles. The inventory value of these vehicles stands at Rs 12,000 crore.
According to the Federation of Automobile Dealers Association (FADA) data, nearly 20,000 dealers will be impacted financially due to the ban.
Dealers tend to keep stock of vehicles with them and sell them when the demand for them rises.
Vinod Dasari of SIAM said that while ban on sale won't impact much, ban on registration would be more severe as vehicles sold in last 1-2 months won't be able to do registration in two days.
BS III production rose after demonetisation, when it ideally should have been reduced and knowing the BS-IV timeline.
Earlier, FADA had asked its vehicle makers to take back their unsold inventory of BS-III vehicles in case the Supreme Court puts a ban on sale.
After March 31, India will switch to BS-IV fuel across the country. The shift to BS-IV ensures that auto industry will move to BS-VI by 2020.
Concerns over alarming rise in pollution level had prompted the transport ministry to announced early shift to BS-IV last year.
BS-IV vehicles have 80 percent less particulate matter (PM) and 50 percent less NOx emissions, according to a research finding.