Taxing private transport

I often use public transport to stop tearing my hair apart navigating Bangalore’s wretched traffic. I believe the crux of Bangalore’s infrastructure woes stem from an uncontrolled surge in ownership of private vehicles, partly due to the poor public transport system and party due to the sudden increase of wealth in the urban middle class. This has imposed a heavy strain on the road system that has led to a slew of short-sighted measures such as one-way lanes, flyovers, under-bridges and widening of roads, often by chopping down trees that serve as lungs of the city.

One of the ways in which some countries, such as Singapore have circumvented the problem is by introducing a punitively high duty (as high as 100%) on purchase of private automobiles. This measure cuts off the problem right at the source by ensuring, maybe a bit autocratically, private vehicles are out of the majority’s reach.

Another way in which this can be done is by by imposing a heavy tax on commercial fuel. The tax, similar to the ownership tax, has to be high enough to deter customers from using their vehicle. While preventing the usage, the measure still provides you with the flexibility of owning and using the car selectively. This data, compiled in Oct 2008, shows that Singapore seems to have imposed a fuel tax too, in addition to the ownership tax. India, as can be seen, has one of the cheapest prices for vehicle fuel, apart the Arab and quasi-Arab (US and Canada) countries. Even more interesting is that fuel price in India is one of the most convoluted figures floating around. It is a complex amalgamation of subsidies and layers of taxes that ensure no one, including the government, I suspect, is sure of the economic impact a paise-rise in fuel price has.

Clearly, subsidies for petrol and diesel have to go to ensure oil companies do not bleed and that they reflect market trends realistically. Secondly, forget subsidies, the government should actually tax fuel sold through all commercial outlets to discourage private transport. Fuel for public transport should be sold only through depot outlets (which already happens). Commercial vehicles too can be provided tax-free fuel but I suspect this will lead to hoarding and black-marketeering.

But, this is easier said than done because it is slightly like bolting the stables after the horses have fled. The automobile industry has grown to mammoth proportions now with a lobby strong enough to affect policies. I doubt if it will go through easily but it must be introduced to solve urban traffic quagmires soon. This will deter private ownership, increase demand for better public transport and automatically improve the existing systems. Solutions of the supply side that include providing better public transport (like the Volvo buses in Bangalore) are prone to be not used as long as customers are not incentivized to switch from existing systems. I think it is criminal that I can choose to drive a four-seater car for a nominal cost, taking up precious road space and contributing to traffic quagmires when there is an alternative available.

Taxing private transport

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