image credits :

The Centre for Science and Environment has launched a campaign to make drivers of cars and two-wheeler vehicles pay the full social cost that they impose on the economy, which I fully support. These costs are typically invisible to the public, but are real and gargantuan.

First, there is the cost of building and maintaining roads, bridges and flyovers. Roads cost several crore per kilometre, bridges and flyovers can cost hundreds of crores. Yet, these are free save for a few toll roads.

Second, traffic police and traffic lights cost large sums. No driver wants to pay for them. But when a power failure puts traffic lights out of action, traffic jams bring home to drivers their true value.

Third, we suffer hundreds of deaths and disabilities every year from road accidents. The cost of human life cannot be estimated, it is said. Yet, this cost is especially high in India, since the accident rate per vehicle is among the highest in the world.

Fourth, we suffer high costs of congestion. Time wasted is money wasted. Slow traffic consumes more fuel and pollutes more. In the US, says Sunita Narain of CSE, the cost of traffic congestion in 85 cities was estimated at a staggering $63 billion in 2003, on account of time wasted alone.

Fifth, cars impose high social costs by occupying parking space. Residential space in Delhi sells for Rs 1.5 lakh per square yard in most localities. So a parking lot 100 yards long and 20 yards wide has a social cost of Rs 30 crore. A single parking space of 23 sq m has a social cost of Rs 37.8 lakh. A car occupies more space than an office desk, yet the desk space pays full commercial rent while parking space costs just Rs 10 per day.

This is a huge, unwarranted subsidy, especially to those who keep their cars parked all day. In New York or Washington DC, parking costs $9 (Rs 400) per hour. CSE’s efforts to raise the parking rate to Rs 120/day in Delhi were kayoed by the middle class and politicians. The parking space occupied by cars is estimated by CSE at 11% of Delhi’s area, as much as all its parks put together. That is a measure of the social cost.

Sixth, vehicles impose high costs through pollution, which leads to respiratory and other disease. Respiratory disease is the number one killer in India. By subsidising petrol and diesel, we subsidise deaths by pollution. The impact is worst on poor pavement dwellers who live closest to the worst pollution.

Seventh, vehicular pollution causes smog that makes it impossible for planes to land in Delhi in winter, forcing them to travel to distant airports to dump their disgruntled passengers. This imposes high costs on the passengers, the airlines, and on tourism. India has barely scratched the surface of world tourism: it gets four million tourists per year, against China’s 124 million. Yet, vehicular pollution strikes right at the peak of the tourist season. The cost to tourism must be huge.

There is little appreciation among politicians or the middle class of the huge social cost of cars. They cannot see that huge subsidies, mostly hidden, are being ladled out to car-owners. These need to be abolished and replaced with user charges or taxes that reflect the full social cost of cars. The Left front, which once supported high taxes on petrol, now acts as though petrol is a Fundamental Right. So does Sonia Gandhi. And so the government hands out Rs 25,000 crore to oil companies to keep the price of cooking and transport fuels low.

Indian petrol is more expensive and diesel just as expensive as in the US (though they are far costlier in Europe and Japan). So, you may think that we tax liquid fuels less than in Europe, but do not actually subsidise them. Wrong. If you compute the enormous social costs of cars enumerated above, you will find that car-owners are often getting a free ride.

Kerosene is subsidised because villagers use it for lighting and the middle class for cooking. Yet, the biggest single use of kerosene is probably for adulterating petrol and diesel. This ruins vehicle engines and increases pollution. In other countries, carbon taxes have been proposed or already imposed on fuels to curb emissions of greenhouse gases. I am a skeptic on global warming. But even I find it zany to actually subsidise carbon emissions, which is what current government policy does.

I am not among those who want cars to be abolished and replaced entirely by buses and trams. Public transport has an important place in cities, but so does private transport. I believe in the freedom of people to travel where and when they want. But this freedom imposes a wide array of hidden costs on a city economy, and car-owners should pay these costs in full. Otherwise we will be subsidising pollution, fuel adulteration, congestion, respiratory disease, and the disappearance of green spaces.

Read more: The economics of India’s high prevalence of child brides

This article was originally published on 24th March 2007 in Times of India.

Post Disclaimer

The opinions expressed in this essay are those of the authors. They do not purport to reflect the opinions or views of CCS.

Previous articleThe economics of India’s high prevalence of child brides
Next articleThe Future of Virtual Rallies in a Post-Pandemic World
Swaminathan SA Aiyer

Swaminathan S. Anklesaria Aiyar is a graduate of St. Stephen’s College, Delhi, and Magdalen College, Oxford. He is currently Consulting Editor of The Economics Times and a research scholar at The Cato Institute. He has been editor of two of India’s biggest economic dailies, Financial Express in 1988-90 and The Economic Times in 1992-94. For two decades, he was also the India Correspondent of The Economist, the British weekly. He has been a frequent consultant to the World Bank and the Asian Development Bank. He is best known for his popular weekly column in The Times of India, “Swaminomics”. Swami, as he is universally called, is also a social investor. He runs the Mukundan Charitable Trust. He has co-promoted three micro-finance institutions – Arohan in Calcutta, Sonata in Allahabad and Mimo Finance in Dehra Dun. He is on the Board of Directors of Artisans Micro Finance Ltd and hopes to convert artisans into share-owning millionaires. And he is building a fleet of medical ships on the Brahmaputra to serve islands that have never seen a doctor.