How to un-jam our cities

Decongesting our city roads will need a three pronged approach—stop overtaxing cars and start charging tolls, delicense and deregulate public transport, and quickly build or expand metro rail networks in all our major cities. The last suggestion has political consensus behind it, but the first two have yet to be adopted by policy-makers.

A basic principle of economics is if you provide something free, then more people will use it. Our urban policy-makers are only belatedly realising this—no matter how much they tax cars or petrol, roads are still free to use and hence crowded. To discourage congestion, especially in busy parts of cities during rush hour, the best solution is to have a variable road charge to access the main arteries, flyovers and intersections. The charge should be in proportion to the vehicle size, and road demand based on time of the day and location of the city. The absolute figure for the charge should take into account road maintenance and construction costs. Simultaneous tax cuts on fuel and vehicles must be enacted so that citizens on the average pay about the same for their private transport. Of course, buses and taxis can be exempted from paying the toll for political reasons, though differential treatment is not the optimum policy solution.

Correct implementation will difference between its success and failure. Sensors on the car with pre-paid road accounts should be automatically deducted at entry points—a similar model is used successfully in Singapore—because physical collection might exacerbate the problem at times. Various intersections and entry points could have different rates flashing for small cars, big cars, and larger vehicles—with different rates for, say, office hours, daytime, and night. Some commuters could accordingly chose slightly longer but less busy—and less expensive—routes to save money.

Such a system can be flagged off by a competent technocracy. A well-designed Private Public Partnership (PPP) plan might do better—transparently auctioning off the revenue collection of competing road routes to different private parties for a fixed period. The contracts should be detailed and the government should retain some rights like the power to use the roads during emergencies. Toll charges should be in round numbers, cannot change more than, say, once every two hours, and price schedules cannot be changed more than, say, twice a year without approval. Prices could also be capped for the next few years to reassure the public without losing many policy benefits. Similar contracts—where turnpikes have been “privatised” in some American cities have had encouraging results, and of course have also been a boon for municipal or state finances.

But even without a PPP model, variable government tolls should significantly prioritise commuting decisions and raise revenue. Take the case of Delhi. They should repeal the BRT corridors—as they use up valuable road space for marginal benefits to some bus commuters, and are nothing but the forcing of equality in traffic discomforts—and instead monetise the entire road through tolls and charges. The additional money can go for an even greater expansion of the Metro than is currently planned. Something that should also be considered is a repeal for taxes on all buses (public or private) and a level regulatory field so that private bus services can challenge the state’s monopoly and improve service for bus commuters. In fact, private bus services are more likely to have higher safety standards than both state transportation carriers that do not care and single private operators who can get away with negligence because they have no brand and reputation to protect.

Most families will buy cars as they enter the middle class no matter how much socio-fiscal engineering the government tries, and that public transportation, while essential in a crowded country like India, can nonetheless never match the mobility and freedom of automobiles. Often congestion and pollution are cited as negative externalities to support the taxation of fuels and cars—with the ostensible bonus of encouraging the funding of green transportation and technology. The logic of environmentalists like Sunita Narain goes like this, and on the face of it is reasonable—cars, trucks, and even planes—do cause a lot of pollution, but do not pay for it. Make sure that their private costs are the same as the public costs they impose—hence the added “Pigouvian” tax—goes the argument.

Except, what about the positive externalities of travel? Of people of different places meeting and talking. Of the ameliorative effects of trade on the militaristic impulse in people—not to mention the hard economic benefits of having access to a larger market. While these are inherently too subjective to accurately quantify, so too were the congestion and pollution costs. And if the idea is to encourage non-fossil fuel technologies, one could as well argue that all non-carbon energy sources be given a tax break rather than slap another tax on carbon—that too has the same incentive for supposedly green technology.

For our city auto-rickshaws and taxis, the licence-permit quota raj never went away. A study by Danish Faruqui & Raghav Sud at the Center of Civil Society shows how the required documentation can cost new auto-owners significant amount of money and time. In fact in New Delhi, an auto rickshaw costs four times as much as a Tata Nano. Why? Because the number of “meters” is fixed by law. It is a classic insider-vs-outsider dilemma. Aspiring auto owners resent the high entry costs, but once in must defend it else face serious capital losses. One way out is to slowly increase the number of permits every year. This will not significantly hurt the current auto-owners, but will over time decrease the auto fares in the city.

Our urban public transportation policy has been extremely biased against the participation of the formal private sector. Now, a metro network is something that only the government can realistically create (although DLF, a private real estate developer, is building even that in Gurgaon), but the private sector can easily provide cars and transportation services for customers of all income levels. In fact, even supposedly market-friendly regimes like Gujarat’s turn out to be more industrialist-friendly as the recent tax increase on second-hand cars there shows. As Barun Mitra and Sauvik Chakraverti of Liberty Institute have argued, government interference has meant that commuters who cannot afford their own cars continue to rely on vehicles that are more expensive, more polluting and more unsafe. We can get traffic under control—we just need the right incentives.

3 Replies to “How to un-jam our cities”

  1. salilb

    Why do you say that BRT provides “marginal benefits to some bus commuters”? Instead if improved with better quality, comfortable buses, BRTs can be useful in getting the car user to use buses. A demand for improving quality is more reasonable than asking for its removal which would lead to slower travel time for existing bus users.

    Secondly, a Metro cannot be a one-stop solution to solve all traffic problems. The need for a metro needs to be justified with suitable studies depending on the geography and traffic flow of the city. The Pune Metro controversy shows how the idea backed by the political class goes completely against the interests of the citizens:

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