The Hindu : Business : Size is critical

Online edition of India's National Newspaper
Monday, Jun 14, 2004

Business

Business

Size is critical

Any one observing the overcrowding and chaos on our roads might wonder if even more four wheelers are the answer to improving mobility especially if they keep growing in size.

WITH THE budget around the corner, SIAM (the Society of Indian Automobile Manufacturers) is as usual lobbying the government to reduce excise duties on cars — this time around it is to 16 per cent from the current 24. It is worth asking, however, whether reductions are the only thing worth considering and whether `rational differentials' might be more in order.

Any one observing the overcrowding and chaos on our roads might wonder if even more four wheelers are the answer to improving mobility especially if they keep growing in size. This is particularly true in urban areas where evidence suggests that more than 90 per cent of cars are used. This applies even more to parking than to circulation, with the former often exacerbating the latter on the narrow roads typical of most of our cities.

This is a problem that Japan confronted head on decades ago with an integrated set of regulations that addressed the critical questions of road space, fuel consumption and taxation in that resource short country. For example, owners of cars that are over a specified length and width and/or are powered by engines of over a certain `size' have to show hard evidence of unique off the road parking before their vehicles can be registered for use. These larger cars are also taxed at a higher rate.

These regulations at one stroke ensure that large cars do not unnecessarily crowd up roads, especially when not in use, while also consuming large quantities of imported fuel. Taxis are exempt from some of these regulations because they are constantly in use, although they can only be run on LPG or CNG to minimise pollution.

These regulations have been revised with evolving technology with, for example, the engine displacement for these `Kei' cars having recently been raised to 660 cc (from 550 cc) and their allowed lengths slightly increased to better allow for `crumple zones,' front and back.

`Our' Maruti 800 is descended from one such Kei car and older readers will remember the wonder with which we realised that large size is not synonymous either with comfort or `performance', leave alone fuel consumption or cost, and that the little cars were such a joy to use.

Countries like Korea largely adopted Japanese standards because they realised they were equally appropriate to their conditions. Cities like London and Singapore have recently gone much further and brought in particularly draconian regulations to discourage private car ownership and central city use, but that may become necessary in India only if we choose not to adopt sensible automobile policies now.

Many larger American cities on the other hand have adopted policies that encourage car-pooling with dedicated lanes, but that may not be possible on our relatively narrow roads even though a study some years ago showed that average occupancy rates in Mumbai were only about 1.2.

Getting back to what is immediately applicable to India, adopting a taxation policy that encourages smaller cars (and thereby discourages larger ones) is a good first step that can be easily and quickly adopted without the regulatory changes necessary with a `Japanese' policy. Taking the current 24 per cent excise duty rate as a base line, cars between 4 and 4.5 metres in length would continue to be charged that rate while shorter ones would pay 20 per cent. Cars longer than 4.5 metres would be charged 28 per cent with that rate going up to a penal 40 per cent for those more than 5 metres long.

These measures could be supplemented by states adopting a road tax structure using the same size bands as a basis.

This policy would not favour any one manufacturer with Fiat, Hyundai, General Motors, M&M, Maruti and Telco already having vehicles that qualify for the lowest proposed rate while Ford, Honda, Skoda, Toyota and even Mercedes are able to bring in such cars in short order from their international operations. The tiny electric Reva would naturally qualify.

On the other hand, reducing the excise duty on buses seating at least 20 passengers might reduce urban road congestion while also reducing fuel consumption and air pollution.

C. Manmohan Reddy

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section

Production falls even as reserves rise

A re-look at the rupee

Exports: Need for corrective action

Size is critical

Two-way price moves in stocks

Weblog navigation tools

Is the assessee bound to disclose source of income?