The Hindu Business Line : Tax the car, fund public transport

None can deny the security one gets by owning a product instead of renting it. This is more so for high-cost durable goods such as housing and automobiles. Even those with low incomes have to spend fairly high amounts of money and time on transport daily, to get to work and return and to send children to school, for instance.

In addition, one makes several trips on a relatively non-routine basis for shopping, medical assistance, entertainment and visiting homes of relatives and friends. Most of the low income people depend on public transport, which is often subsidised. They do not, however, enjoy the perceived convenience of owning a motor vehicle.

Development Constituents

There are certain common goods and services, which enter every person’s or family’s perception about what constitutes development for him/them. Roti, kapda and makaan have top priority within the framework of basic needs. If each and every person desires and aspires for just the basic needs satisfaction would be that much easier.

It is part of human nature that once the basic needs are met, other demands pile up, driving the person to put in more effort to earn more. In line with the growing purchasing power, supply catches up. The processes contribute to economic growth at the macro level and ‘happiness’ at the micro level. Thus, as incomes rise, demand for various goods and services increases progressively in terms of both quantity and quality.

In the case of transportation, the progression is generally from renting to owning, on the one hand, and from public bus/train to two-wheelers and cars on the other. In the olden days, ordinary people used to rent a horse-drawn coach or a rickshaw, while the well-to-do had one of their own to ensure that their social and economic status was demonstrated, seen and respected. These days, however, renting and ownership options have taken a great leap forward as they apply to cars and even aeroplanes. Fed up with delays at airports, top brass in business, and even in politics, purchase their own aircraft and enjoy the comfort and save time.

Car Culture

Henry Ford would not have imagined the widening and deepening of the supply of and demand for cars even within the US, let alone the rest of the world, especially China and India. Surfing the net, one would come acress such statistics as automobile emissions account for more than one-fifth of green house gases; there are a little over 230 million registered vehicles, and each car on an average emits 12,000 pounds of carbon dioxide, the absorption of which requires 240 trees. Despite the US accounting for only 5 per cent of world population, its share in world automobiles is a high 30 per cent; the nation contributes 45 per cent of the world’s automotive carbon-dioxide emissions.

According to the US Bureau of Labour Statistics, in 2004, an average American family spent 32 per cent of total expenses on housing.Car was next in priority, taking up 17 per cent of the expenditure. Food came third with 13 per cent, and the other expense items accounted for a third.

For several years after Independence, India shied away from the car cult. For instance, on an average, the motor vehicle output per thousand people was less than one until 2000-01. Only in 2005-06 did it reach 1.5. Also, the initial emphasis was on the production of commercial vehicles. Since the late 1980s and early 1990s, there was a clear relative shift to passenger vehicles (Table).

In the major cities of the world, car density is either close to one car for two persons or less. For instance, per 100 persons, San Francisco (Bay Area) and Paris (Ville de Paris) have 58 cars, while Frankfurt and Toronto have 50 each. India has a lot of room to catch up, especially in the urban areas. Even if one assumes that all the 1.3 million passenger cars are in Urban India, the car density will be 1.3 million out of about 300 million people or one car for 270 persons. The fact that there is still large room for rapid expansion of car ownership in India is a clear signal of what is in store in the years to come: Clogged roads, emission-related problems and road accidents, to name a few.

Ownership versus public transport

The Public Transport Users Association of Victoria, Australia, has on its Web site, put a note on the common urban myths about public transport. One of them refers to the myth that those owning cars will not use public transport. The fact, however, is that most people will continue to own and use cars and resort to public transport when the need arises, as in the European cities.

In the Indian context, there is this possible alarming scenario of public transport becoming more and more expensive, totally unreliable and of low quality, as car ownership rises, with ludicrously cheap cars and innovative financing mechanisms. None should dream about a world without private cars in the urban areas. It is utopian to expect the owners of cars to happily give them up as countries promote a transport system comprising public bus, mass transit rail, and taxi.

A government in pursuit of inclusion and equality must not be seen to encourage car culture to the detriment of the common people, who in India are the vast majority. Tax the car and fund infrastructure and public transport should be the winning mantra.

In the next Buget, policy-makers would do well to levy a special tax on each new car purchased, say, at 10 per cent of cost, to exclusively fund road development and metro rail projects.

(The author, formerly with the National University of Singapore and the World Bank, is a visiting faculty, Sri Sathya Sai University, Prasanthi Nilayam. He can be reached at bhanoji@gmail.com. )

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