The Hindu Business Line : Small car, big achievement

Makers of small cars view their products as a timely and remarkable innovation fulfilling the aspirations of India’s rising middle class, and as a solution to its urban transport problems. They are right about the first — but completely wrong about the second. Carmakers also err in wishing away the huge costs of congestion and environmental impact of small cars. Public discourse needs to highlight these costs and demand urgent introduction of public policies fo r their moderation.

The first small car off the block — the Nano — has won well-deserved accolades from all. Some regard it as an important milestone for the auto industry, in addition to being a very helpful product for the Indian consumer. The Nano and its determined competitors promise to supply 3-4 million cars annually from as early as 2013, just five short years from now. Contrary to the car-makers’ assertions, the majority of these cars will end up in India’s metros and fast-growing cities such as Ahmedabad, Bangalore, Hyderabad, Pune, and so on.

Not the solution

Experience around the world shows that cars, small or large, are no longer the solution but a problem in urban transport. Cars use several times more road and parking space, as well as fuel per passenger km than public transport; they also spew far greater quantities of pollutants and gases.

Globally, therefore, the bulk (60-90 per cent) of urban transport is provided by public transport systems (like in Jakarta, London, Seoul, Singapore, Tokyo), and cars play a minor role despite high car ownership in many countries. Low ownership and poor infrastructure in India will further limit the contribution of cars in urban transport to be marginal at best; the share of cars in transport in Mumbai and Delhi is estimated to be just about 10 per cent.

Even such meagre additions to the car population will be accompanied by huge penalties in the form of aggravated congestion and associated environmental and other impacts. Road networks in the urban areas have miserably lagged behind the multi-fold rise in car population during the past 15 years. Roads are heavily congested and average car speeds have fallen to about 10-12 km/hour during peak hours in Mumbai, New Delhi and several other cities. The addition of several million small cars annually will worsen the congestion and push average speeds down to 5 km-10 km/hour.

The cost of smoke

Traffic congestion imposes heavy costs on the economy, estimated in some countries to be around 3-6 per cent of GDP. Congestion causes longer travel times and wastes several million person-hours. The more serious costs of congestion, however, come in the form of fuel wastage and increased air pollution and emissions.

World Bank studies found that as average speeds start to go below 40 km/hr, fuel consumption begins to rise sharply, especially at speeds below 20 km/hr. At an average speed of 10 km/hr and 5 km/hr, consumption is more than four and six times that consumed at 40 km/hr. Corresponding increases also take place in particulates discharged and greenhouse gases emitted.

Claims of high fuel-efficiency, high environmental standards and low negative impact for small cars are based on tests conducted under “standardised” driving conditions. Unfortunately “standardised” conditions have little relevance to ground realities. The environmental performance claimed for small cars, therefore, needs to be validated at very low speeds of 5km-10 km/hr — the speeds they are likely to be driven at in urban centres.

What’s good for one, isn’t for all

Enhancing traffic capacity by building new roads, elevated expressways, flyovers, high-rise parking structures etc. is very expensive and time-consuming — and provides only temporary relief. As soon as such facilities become available, they are overwhelmed by a flood of new cars, especially in such newly emerging economies as China and India.

While the rapid spread of car ownership is unavoidable, policy-makers need to realise that cars are an impractical and wasteful mode of transport in urban areas from the viewpoint of the public-at-large, given the costs mentioned above. The answer lies in urgent development of public transport.

The only way to control the use of cars for personal transportation is to minimise their excessive claim on urban road space at the cost of public transport. Restraints on car use have been applied in several cities around the world for a number of years now, and have been found to be effective in improving traffic flow and air quality.

Policy measures include regulations to control access to certain areas during designated hours and/or days of the week, charges for congestion, registration and parking fees that reflect the true costs of providing infrastructure and space for driving and parking cars, and taxes to defray the environmental and public health costs attributable to car use.

Perverse incentives

Substantial experience and assessments are now available on the impact of measures for restraining car use in urban areas. These show that such restraint is critical in framing effective urban transport policies. It is also found that the costs to society and economy of driving cars far exceed taxes and fees collected from car-owners by public authorities — hence, the need to urgently restructure fiscal policies.

A World Bank study found that the current policies of Central and State governments in India have the perverse effect of subsidising private car use while heavily penalising public transport! Such perversity is aggravated by progressive lowering of excise duties on small cars in successive Budgets — a point that the Finance Minister, Mr P. Chidambaram, would do well to keep in mind.

The justification that such lowering of duties is necessary to build a platform for a large domestic market and thus win global markets is simply untenable. Japan and Korea emerged as global car exporters in the 1960s and 1970s respectively, despite modest domestic car markets.

From bad to worse

Policy-makers must seriously re-consider the premise that the worsening transport situation in urban India can be addressed by the uncontrolled addition of privately owned cars. Far from resolving the urban transport problem, they will actually compound it and cause huge damage to the economy (traffic delays and loss of productivity) and the environment.

The challenge of putting in place a programme for the rapid development of public transport, coupled with restraints on car use in urban areas, can be ignored only at the country’s own peril.

(The author was Chief Economist, Asian Development Bank.)