The Supreme Court on Friday lifted ban on registration of diesel vehicles over 2000cc in Delhi and NCR.
The apex court also directed that car manufactures, dealers and buyers have to deposit one percent environment compensation cost on purchase.
The decision comes days after car manufacturer Mercedes Benz asked the apex court to lift the ban on diesel vehicles after the company said that it was ready to pay one percent environment cess.
The Supreme Court had last year banned the sale of large diesel vehicles in New Delhi noting that higher engine capacity leads to higher levels of pollution.
The verdict, however, did not go well with the car manufacturers.
An apex court bench had earlier in January rejected the plea by car manufacturers Mercedez, Toyota and Mahindra and Mahindra to lift the interim ban.