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GLOBAL FUEL ECONOMY INITIATIVE GFEI Indian Symposium 25th November 2009 The Ashok Hotel, New Delhi, India PowerPoint Presentation
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GLOBAL FUEL ECONOMY INITIATIVE GFEI Indian Symposium 25th November 2009 The Ashok Hotel, New Delhi, India Presentation by T. K. Malhotra President Federation of Indian Automobile Associations FIAA MINIMIZING FUEL WASTAGE IN URBAN TRANSPORT PROBLEM STATEMENT

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slide1

GLOBAL FUEL ECONOMY INITIATIVE

GFEI Indian Symposium

25th November 2009

The Ashok Hotel, New Delhi, India

slide2

Presentation

by

T. K. Malhotra

President

Federation of Indian Automobile Associations

FIAA

slide4

PROBLEM STATEMENT

  • To Compare the relative merits of increased road fuel taxes, tolls and electronic road pricing as a means of reducing Urban Traffic Congestion, thereby saving costs.
  • Why is the price elasticity of demand for private car- transport a problem ?
  • What could be done to increase the price elasticity of demand?
reasons for traffic congestion
REASONS FOR TRAFFIC CONGESTION
  • Increasing Population.
  • Increasing Purchasing Power.
  • Finite network of Roadways.
  • Due to constantly increasing demand and static

resources, the traffic congestion is going up

exponentially.

slide6

POSSIBLE SOLUTIONS TO REDUCE TRAFFIC CONGESTION

  • By Increasing Infrastructure.
  • By improving road maintenance and road standards to match the traffic growth.
  • One of the possible solutions to the problem is by imposing additional tax on the consumers/commuters.
slide7

Vehicle Growth

Acute Problem

Delhi (last 16 years)

Population growth – 2 fold

Vehicle Growth – 9 fold

Congestion causes : Increase in Travel Time

Pollution - Global Warming

Noise Pollution

Health Issues

But hardly any driver would care for all this

slide8

How to Map Social Externalities

To The Actual Cost of Journey

So that people would care for it

slide9

MARGINAL SOCIAL COST OF JOURNEY

MSC = Road Damages + Social Costs + Environmental Costs + Time Costs + Other Costs

We need a dynamic pricing system where

each consumer should be charged amount = the marginal cost of his presence on road

slide10

COMMON FORMS OF TAXING

  • Road Tax
  • Toll Tax
  • Fuel Tax
  • Congestion Pricing
  • Electronic Road Pricing
road tax
ROAD TAX
  • Road Tax, Vehicle Excise Duty are the taxes paid to acquire a vehicle to drive on public roads. These are one time taxes imposed when purchasing a vehicle.

ADVANTAGES

  • Reduces the demand for vehicle to some extent

DISADVANTAGES

  • No substantial effect on road congestion
slide12

FUEL TAX

  • Also known as fuel duty.
  • It is a sales tax mainly on Gasoline, Petrol and CNG
  • ADVANTAGES
  • Due to inelastic nature of use of fuels, it is a source of

revenue in short run, in long run it will cause reduction

in the use of fuel and the consumer will look for

alternate means of travel. Thus reducing congestion.

  • DISADVANTAGES
  • It is not economical for the poor.
  • It is imposed irrespective of road congestion.
toll tax
TOLL TAX

Tax imposed for passing a particular stretch of road

  • ADVANTAGES
      • Adds to the revenue of the government.
      • Toll roads have less congestion as people switch to

toll free roads.

      • Traffic inflow to congested roads can be controlled

by changing the toll price.

  • DISADVANTAGES
      • Cost to state for infrastructure.
      • Manual toll collection wastes time.
      • Increases congestion on toll free roads.
congestion pricing
CONGESTION PRICING

Congestion on roads lead to massive wastages both in terms of time and fuel.

A pricing system based on the marginal social cost of presence on roads for the commuters is a solution.

slide15

GURGAON TOLL PLAZA

Fuel worth Rs 1.2 crores wasted in long queues, daily.

Waiting time during peak hours between 15 – 25

minutes.

Each vehicle spends more than 1.5 litre additional fuel, accounting for a massive daily loss of Rs 18 lakh to state exchequer in fuel subsidies.

The expressway built at a cost of Rs 1000 crores for use of 80,000 vehicles daily. However, about 2 lakh vehicles are using the toll plaza, causing massive traffic snarls.

(Source CFTI)

slide16

Average time spent daily by a vehicle in congested traffic: 90 minutes

Waste of fuel in traffic jams per

day : 2.5 litres (0.75 litres for

two-wheelers)

Cost of fuel wasted by cars in city in a day : Rs. 7.5 cr

Cost of fuel wasted by two – wheelers in city in a day : Rs. 2.5 cr

Govt. subsidy on wasted fuel : Rs.1.5cr

(Source: CTI)

slide17

ELECTRONIC ROAD PRICING

Automatic/Electronic Toll collection

ADVANTAGES

  • No daily purchase of toll tickets
  • Manual error is highly reduced
  • No time wastage to buy ticket
  • Leads to Efficient Road Usage-

e.g. Spreading of traffic to off-peak hours

  • Latest Technology : Use Statistical data to predict

congestion in next 1 hour and vary the toll prices accordingly.

DISADVANTAGES

  • Infrastructure cost high
slide18

PRICE ELASTICITY DEMAND FOR

PRIVATE CAR TRANSPORT

slide19

Why

Inelastic??

Compulsory Usage

No Close Substitute

slide20

PROBLEMAT HAND

Demand for Private Car Transport is highly price inelastic.

EFFECTS (Price Hike)

  • In short run, the purchase of expensive new car may be delayed.
  • In long run, lack of better means of transport and the

status symbol attached to ownership creating a need

for new car.

increasing price elasticity of private car transport methods
INCREASING PRICE ELASTICITY OF PRIVATE CAR TRANSPORTMETHODS

By introducing more substitutes, the demand can be made

elastic by following ways:

1. Improving Public Transport Facilities

  • Introducing bus and metro services i.e. Low Cost transport
  • Improvement in infrastructure, comfort and qualitythereby reducing fuel usage
  • Reduction in bus/rail fares lead to transfer of passengers from private to public vehicles
methods
METHODS …………

2. By Introducing eco-friendly policies

  • Promoting use of cycles by providing special lanes for cyclists
  • Promoting car pooling

3. Parking Restrictions

  • High parking fares
  • Less parking spaces

4. By introducing tedious & costly license

acquisition process

slide23

So Whatever We do

We’re not able to effectively deter

People from opting for Private

Car Transport

slide24

Because……..

  • They have a tendency to become habitual.
  • People adopt to these taxes, which become a source of revenue for the government, rather than a deterrent for people

E.g. Fuel tax just means that fuel is expensive

slide25

Some Congested Pathways are a vital

link – people would have to use them

anyways. A toll on these roads give a

direct impact and commuters make a

switch.

slide26

REMOVE THE COMPULSORY NEEDS

Restructure our society to be able to bypass the need for travel –

work from home wherever possible

slide27

BEHAVIORAL ASPECTS

  • Car Travel is not only need based but also serves as a status symbol
  • People are not yet accustomed to things like :
  • Internet Shopping
  • Car Pooling
slide28

Initiatives to diffuse traffic congestion :

  • Creation of No-parking Zones
  • Dedicated Parking Zones (High Parking Charge)
  • Cycle Lanes and Pedestrian Lanes
  • Design of Parking Spaces to deter car usage and promote other modes
  • Cycle parking near public transport places
slide29

If nothing else

Increasing Road Space :

Multilevel Roads

2. Designing roads to make flow easier and faster for traffic

slide30

CONCLUSIONS

  • Say in a city like Delhi
  • We can invest either to build several
  • flyovers to improve traffic flow or
  • we can invest more into developing and
  • improving public transport systems which
  • will help to reduce congestion and save fuel
  • Effects of former can be nullified very quickly
  • due to population increase
  • The latter is a more workable strategy
slide31

THANK YOU

Please mail your questions to

tkmalhotra@aaui.org