11 May 1999
Author's notes:
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Barun S. Mitra
Founding Trustee, Liberty Institute
The intention of the judiciary in asking the automobile manufacturers to provide Indian consumers products that meet international standards is laudable. However, it may not have the desired effect because it ignores the economics.
Vehicular pollution load is not just a function of level of emission. It is also a function of distance traveled, congestion, bad traffic management, low level of maintenance, quality of fuel and roads, etc. Thus, even the cleanest of vehicles may not help lower pollution.
Secondly, a ceiling on the number of new vehicles to be allowed to operate in the city may actually have an opposite impact. People may continue to use their old vehicles, or the same number of vehicles travels more.
40 years of license-permit raj helped to create and sustain monopolistic industries that faced very little competition. It was a sellers market where high cost and low quality had become the norm. Companies gloated over decade long waiting list of buyers. Not only the consumers, but also the environment lost out in the process.
The fiscal policy too has contributed to this problem. The extremely high levels of taxation on vehicles, and fuel, first to discourage private transportation, and then to raise revenue, has forced up the cost of transportation. Consequently, the service life of vehicles had to be increased, and replacement of older vehicles with better ones slowed down.
If the fiscal policy towards vehicles and fuels has had such a perverse effect, there is not much ground for optimism that a new generation of emission and fuel tax would do any better. Apart from the difficulty of determining the level of that tax necessary to obtain the desired goal, it may further politicise the process. After all, it is the high price differential between petrol and diesel that has contributed to a thriving diesel car market like no where else in the world.
The need for an effective public transport system can not be overstated. On the other hand, rather than thanking the chartered bus operators in Delhi we have the police extorting crores of rupees, from the thousands of private buses. Taxis and auto-rickshaws are seen as avenues of providing employment, rather than a commercially viable service. The fares are mandated at levels that make replacement of older vehicles almost impossible. The government decides on what vehicles to be permitted for use as taxi. As a result we have the most inefficient of vehicles operating as taxis, while the world over, one of the most favoured manufacturers of taxis is Mercedes Benz.
Then, our town planners. It is estimated that about 25% of fuel in urban areas are wasted due to congestion and bad road conditions. Who, for instance, built the high rise commercial complexes on the Connaught Place radials without paying any attention to the requirements of commuters? Rent control and land ceiling laws have made many commercial areas operate at below market cost, attracting greater number of clients, and thereby contributing to congestion.
It is clear that policy framework that doused competition, and severely restrained trade, slowed down technological innovation, along with chains that shackled urban development has all contributed to the dirtying the air. It is time we recognised that free trade and open competition are the best friend of not just the consumer but also the environment. It is economics that determines the pace of adoption of new cleaner technologies. Justice demands that if the auto manufacturers are to be held guilty, then a lot of the other heads must roll as well. But that by itself will not clear the air, unless attention is paid to the role of the market in providing better environmental goods, including air and water.
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