The Hindu Business Line : Vehicle Area (Annual) Levy

Though congestion charging will certainly help reduce cars on the road and travel time, it is not the best policy. A revenue-neutral Vehicle Area (Annual) Levy should be the primary plank of a good city transport policy. VAAL is not a tax on the public at all, but is strictly to optimise road space, says VIVEK MOORTHY.

DRIVING PEOPLE to the public transport system by making vehicles costlier is probably the way to decongestion.

The Prime Minster's call for better road manners, during his visit in June 2006 to Bangalore to inaugurate the metro project, compels one to assess if the metro can deliver. Will it provide low-cost, quick, flexible travel for the bulk of the city's commuters? And will it take the load off the road so as to speed up road traffic adequately? The answer to both questions is no.

Congestion charge

Consider the first. The metro will take a few years to complete, hopefully by 2011; it is hardly low-cost, even if the fares are subsidised. Nor will it cover the bulk of the commuters as only some high-density stretches are included in its route. As for the second question, public transport cannot ensure adequate road speed. Cars always proliferate to slow down traffic. In London, despite its vast rail underground, road speed in the main city averaged about 12 kmph in 2000, about the same as at the turn of the century with the horse and coach! Only after Mayor Livingstone introduced a £5 (now £8) congestion charge for entry into central London did the average travel speed inch up to the double-digit — still slow. Some 10-lane freeways in Atlanta and Los Angeles are almost parking lots during rush hour.

Without any doubt, some form of congestion charging for private cars is needed to induce people to use public transport. Building roads and flyovers is not enough. Ascribing traffic woes to the inefficiency of the authorities also betrays grave parochial ignorance.

A stiff levy

Peak-time, peak-area congestion charging, as in London, will certainly help reduce cars on the road and travel time. But this is not the best policy. Instead, a stiff Vehicle Area (Annual) Levy — VAAL — should be the primary plank of good city transport policy. VAAL should be strictly revenue-neutral — the collection should go towards reducing fuel and vehicle levies, and any surplus returned as income-tax rebates or used to retire public debt. VAAL is not a tax on the public at all, but is strictly to optimise road space. VAAL focusses on the underlying scarce resource, road area, and it is pre-emptive. In contrast, London or Singapore style hi-tech congestion charging is hard to implement under Indian conditions. An ounce of prevention is worth a tonne of cure. A stiff VAAL will make existing cars largely unaffordable. Commuters will be compelled to switch to driving much smaller owner-driven vehicles (ODVs) such as bicycles, mopeds, scooters, or commercial passenger vehicles (CPVs) such as mini-buses, passenger vans. Gradually, space-saving passenger vehicles will be designed — without unnecessary luggage space, even double-deckers.

Such private transport may be much better than conventional public transport in many respects. First, the cost factor, taking into account taxes for the metro. Second, time flexibility and boarding convenience. Third, and most important, the potential range of the city covered. Shared CPVs can come in luxury and normal versions, with different seat sizes, arrangements and leg area, and correspondingly different fares.

A good substitute

Ideally, commercial private transport can co-exist with public transport, a valuable complement, the proportions being determined by urban density and whether good public transport already exists. But starting with no or limited public transport, as in Bangalore, VAAL might prove an adequate substitute. In his 1986 book The Other Path, economist Hernando de Soto describes how unorganised van operators carried the bulk of the passengers, especially the poor, in Lima, the bustling and growing Peruvian capital, like many cities in India today. He documents well how the fleet was upgraded after being granted legal status in 1965.

A change in mindset is needed to realise that transport for the public is not necessarily public transport. Encouraging, legalising and regulating (for safety) commercial passenger vehicles is the best contribution the state can make to ensure transport for the public. In contrast, building roads and metros in the city involves demolishing trees, old buildings and parks, thus destroying both valuable city heritage and green cover. Destruction, which some car buyers hypocritically complain about, is a part and parcel of progress. But with a stiff VAAL to check the explosive growth in vehicle area, such destruction would be less.

The communication revolution can aid CPVs. Much of the problem with conventional public transport is that the authorities have no incentive to provide (multi-lingual) information on bus routes. Not so with private transport operators. They will provide, most likely free, call centres or phone assistance to mix and match passengers and driver destinations, with neighbourhood or door-to-door pick up. Based on important destination based and/or grid numbering of city locations, pick-up and drop-off points and areas, regular routes and schedules, and convenient CPV numbering systems can evolve.

A stiff VAAL creates both the demand and supply for space-efficient CPVs. With petrol expensive and vehicles cheap, auto drivers are unwilling to pick up and drop passengers who are out of their way. Under VAAL, it will be the reverse: Petrol will be cheaper as taxes are removed and vehicles more expensive. To break even on the fixed VAAL cost, CPV operators will need to keep the vehicles running as much as possible. Although each vehicle will be used on busy roads more, the huge drop in total vehicle area will lead to freer roads. Petrol consumption and carbon emissions per passenger-km travelled will decline.

Innovative time-sharing deals with joint ownership and sub-letting can emerge, as in vacation homes.

A vehicle that functions as a taxi or share taxi during the day, and even a scooter-taxi, could be rented out or sublet for personal use from, say, 7 p.m.-7a.m. CPVs by day, they can be used as self-driven vehicles by night. Sedans and luxury cars that become too costly to own individually will be mostly rented or sub-let for weekend and holiday family use.

As travel times rise unpredictably, commuters need alternatives. Charging, directly, steeply and, pre-emptively, for road space is the best solution. `Right-wing' ideological zealots will oppose a steep VAAL as being anti-freedom. But to get to work and around towns and cities quickly and easily, and more so to preserve them, the revenue-neutral VAAL is the best road ahead.

(The author is Professor and Chairperson, Economics and Social Sciences Area, Indian Institute of Management, Bangalore.)

More Stories on : Roadways | Insight | Taxation

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Export deflator?

The price of fighting inflation

Food Processing Sector: Opportunity by the ladlefuls

Professionals in IAS

Foreign remittances don't translate to industrial investments for Kerala

Vehicle Area (Annual) Levy — Taking the load off the road

Root out corruption