Automobile sector is killing growth

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By Dr. Bharat Jhunjhunwala

The automobile sector is one of the engines of the Indian economy. We are producing a large number of cars today. Simultaneously traffic jams have become commonplace in all metros. The purpose of the automobile revolution was to make travel fast and convenient for the users. But the opposite is happening. Time taken in travel is increasing because cars cannot move due to congestion.

People are reaching their destination unnerved and uptight because of long hours spent in solitary confinement. This writer had occasion to travel to three metros recently. Travel from Howrah station to Ballygunge in Kolkata took 1 hour; from K. R. Puram to Basavanagudi in Bangalore took 1.30 hours and from Nizamuddin to Karol Bag in Delhi took 2 hours. Only three years ago the same journeys could be completed in one-third time. Just like overeating creates stomach sickness, similarly excessive number of cars is creating traffic sickness.

More importantly, the traffic jams created by car owners impose a huge cost on hapless bicyclists, scooterists and even pedestrians. These poorer people waste their time because the motorists have captured our roads. Yet this same large number of cars adds to the statistics of growth rate. Number of cars sold and petrol burnt in traffic jam is counted as additions to GDP.

The situation is no different in other countries. A webpage on Australia’s traffic says: “A hundred years ago it took about one hour to travel from Paramatta to the center of Sydney by horse and cart. Today it takes longer by car.” Data provided by the Bureau of Transport and Regional Economics of Australia show that congestion costs — principally longer travel times —were set to double in Australia by 2020. Professor Matthew A. Turner of Department of Economics at the University of Toronto has done a study of the development of the highways system in America. He writes: “In 2001, the average American household spent over two and a half hours (or 161 person-minutes) per day in a car to accomplish travel that required only 147 minutes in 1995. Multiplying by households and working days, we find that US households used about 5 billion more hours in 2001 than in 1995 to accomplish the same amount of routine daily travel.”

One suggested solution is to build more roads and flyovers. But number of cars increases and traffic jams come back. Professor Turner says, “Adding 10 percent more lane miles to a city increases vehicle miles traveled by 10 percent. That is, in less than 10 years, new roads cause traffic increases directly proportional to the increase in capacity.”

We can see this happening before our eyes everyday. Large numbers of flyovers have been constructed in all metros but traffic jams have continued to increase. Limited amount of land is available in the cities for making roads, flyovers and parking lots but the number of cars that can be produced is almost unlimited. Therefore, the supply of cars increases to match the availability of roads.

The improvements in fuel efficiency have made things worse. The Ambassador car gave an average of 11 km per liter in the seventies. Present day cars give 20 km per liter. This has reduced the cost of car travel. More people are using cars and traffic jams are increasing. The problem will only become worse if an average of 30 km is obtained from the newest models.

The Finance Minister has increased the price of petrol and diesel and also tax on large cars in the recent budget. This is welcome. But this does not solve the problem of traffic jams because this burden is like a drop in the ocean for urban car owners. The incidence on a city dweller driving 2500 km would be about Rs. 500 per month. Moreover, this expenditure is mostly tax deductible for professionals and businessmen. The net payment, therefore, is a paltry Rs. 350 or so per month.

Expansion of metro and bus services will not help either. Professor Turner explains: Increases in the supply of public transit operate in the same way as road capacity increases do: every person who gets out of their car and onto a bus makes free some extra capacity on the road. In a few years, the road is again filled up to its initial level. Adding public transit, therefore, increases the total number of persons that are transported but does not reduce traffic congestion.

The only solution to traffic jams is to impose a “congestion tax.” Londoners have to buy a daily permit of GBP 8 to enter the city center. Although this has not eliminated congestion, the situation would be much worse without such a tax. Similar taxes have been imposed in Stockholm, Seoul and Singapore with good results. We should similarly impose an “entry fee” of Rs. 1000 per day for entry of cars into specified areas of the metros.
Even government vehicles should not be exempt and the charge should not be reimbursed by the departments. Reduction in number of government cars was a significant contributor to release of traffic congestion in Seoul. Metro and bus network should be expanded along with imposition of this congestion tax. That will provide a cheaper and quicker mode of transport to the people. Just as rich New Yorkers prefer to take the subway instead of driving into the city, so also rich Indians will take Volvo busses to Writers Building.

Care should be taken in implementation of such a congestion tax, however. It is reported that the City of London has collected a massive £800 million though this tax. But most of the collections have been spent in meeting the administrative expenditures of the police. Therefore, we must use modern electronic methods to implement this scheme and not allow the bureaucracy to usurp the collections.

The Hoda Committee constituted by the Planning Commi-ssion had given the same suggestion in its report of 2006. Other recommendations of the Committee were: (1) Increase in parking fees; (2) Increase in registration charges of cars; and (3) Collection of annual road tax on the basis of size of car or carbon emissions. These suggestions must be implemented forthwith. We should not waste precious time of the people for securing unreal GDP growth from sale of cars and burning of petrol in traffic jams.

Courtesy: Daily Excelsior

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