Optimise investments, speed and economy in broad transport policy
Ashok Datar | May 23, 2023
We are not paying sufficient attention to the rapidly growing oil imports (from pre-Covid-19 to post-Covid, in 2022). They surged from 102 million tons (MT) in 2019-20 to 168 MT in 2022-23, an increase of 68%.
India is the largest importer of oil in the world, and, at current rate, we will be second in the next few years – not a very safe thing to be. Our share of domestic oil production remains at 13%. The value of imports in rupees has increased by 89%. The trend will increase further.
Against this, the proportion of electric vehicles is barely 2% of annual addition of cars. It will take us five years to achieve critical mass for electric buses, cars and two/three-wheelers to achieve the momentum. Till that time, the growth trajectory of imports will be on an upswing and this increase now onwards will be dangerous! Our balance of payments will increasingly get threatened and lead to huge annual increase beyond 27% that have accrued over previous year.
New models of cars and SUVs coming in the market along with newer highways will further increase the number of cars and auto fuel consumption perhaps at an accelerated rate. This is going to spell disaster.
It is important we recognise that increasing our dependence on oil by creating demand through vehicles is not sustainable.
Even the obvious solutions as mentioned below will not help achieve this very difficult yet very important goal.
1. Reduce the number of cars in cities having more than a million population through tighter control over ‘free parking.’
2. Increase the Purchase Tax on cars (a state subject, with tax rates ranging from 6% to 14%) to 30% across with 12% cap for electric vehicles.
3. Reduce taxes on buses (paid annually lifetime) to one time at 10% irrespective of if they are deluxe, AC or any variety. Today tax rates depend on the number of seats in buses and whether they are AC. Air-conditioning is commonplace and hardly increases consumption of fuel.
4. To encourage switch from cars to buses a toll of Rs 10 only should be charged at each Naka. To make for this loss of revenue, toll on cars should increase by 10%.
5. This twin rebalancing between rates of tolls and taxes more for cars and less for buses will not reduce the revenue. Together with stricter and paid parking in cities, it will reduce purchase of vehicles and lead to reduction in consumption of imported fuel with a sizeable reduction in emissions.
But what about railways?
They will play a bigger role with the increasing share of goods and passenger traffic. Railways can run on electricity which will be at least three to five times cheaper for the country both in cost and in forex (to practise Atmanirbharata). But if we use conventional speed for trains (including a deceptive increase in the speed with Vande Bharat trains, which is no better than Rajdhani) it is simply not possible for us to put up more bullet trains that need a lot of time and money. A practical alternative is to have semi hi-speed trains of 200 km/hr which are cheaper per lakh passengers carried by highways/car-bus- goods truck combination. 200 km/hr is sufficiently hi-speed for trains to woo motorists away from highways travel to a sizeable extent.
We also need to produce more electricity preferably through renewable sources. We can add some thermal power too for a short and tactical period, thus reducing investment per km of network. Operating cost per lakh people or million tons will be significantly less. I hope railways can calculate that soon.
Share of railways, especially semi hi-speed trains, should increase in overall transport through prioritised investment on several routes including the Golden Quadrilateral linking major cities on the grid to enable hi-speed and low cost of fuel compared to roads. Perhaps our need for more multi-lane highways will reduce.
Let us not forget the investment of a two-track railway system for passengers and more dedicated freight corridors will reduce the cost and time for goods transport especially the system will be integrated between goods stations and ports.
Roads and cars
The year ended March 2023 saw an increase in cars of 27% over previous year, which is alarming. Absence of any ‘either pay or don’t park regime’ and persistence with lower taxes albeit charged annually on buses as compared to a small tax of 10% is charged that too only in first year for cars.
Additionally, more car models and highways will continue to increase the demand for cars at around 15 to 20% p.a. and government can only marginally increase excise on auto fuels.
Increase in demand for conventional vehicles will not have impact of electric vehicles for at least two-three years more. As the number of vehicles using auto fuels stabilises, some impact will be felt from 2025-26 onwards. With more and better roads and highways and demand for vehicles, demand for consumption of imported crude oil will also increase.
As two dedicated electric rail freight corridors become operational from Punjab in the north to Mumbai in the west and Kolkata in the east, there is a possibility that this may bring down the demand for diesel and diesel goods trucks.
We should have same toll for cars and buses (or eliminated altogether for buses in recognition of their charging lower fares and carrying twenty times more people and much less consumption of imported fuel). With electric buses and zero emissions the balance will tilt in favour of sizeable reduction in the import of crude.
With electric buses and highways now, there is no reason to delay these “critical” reforms which will pave way for sustainable public transportation through use of buses (within and between cities in addition to metro).
Revive much delayed and forgotten parking reforms on high priority
Strong parking reforms in all million-plus cities with higher one-time tax on cars – at least thrice in percentage to that on buses – is the need of the hour. Paid and regulated parking will increase the share of electric buses and autos with hi-speed, cleaner and cheaper energy. Instead, today it is the other way around. Let us understand that this is less of ethical measure to look after the bottom 50% of population. These fiscal and prudent measures are needed.
It is time we choose the right balance between railways and roads with urgent focus on semi high-speed trains and also have sustainable transport for India (not only 20% motorists). This will lead to optimum use of scarce land.
Datar is a Mumbai-based economist and transport analyst.
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