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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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GLOBAL FUEL ECONOMY INITIATIVE

GFEI Indian Symposium

25th November 2009

The Ashok Hotel, New Delhi, India


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Presentation

by

T. K. Malhotra

President

Federation of Indian Automobile Associations

FIAA



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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?


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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.


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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.


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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


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How to Map Social Externalities

To The Actual Cost of Journey

So that people would care for it


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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


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COMMON FORMS OF TAXING

  • Road Tax

  • Toll Tax

  • Fuel Tax

  • Congestion Pricing

  • Electronic Road Pricing


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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


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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.


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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.


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    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.


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    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)


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    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)


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    ELECTRONIC ROAD PRICING 90 minutes

    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


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    PRICE ELASTICITY DEMAND FOR 90 minutes

    PRIVATE CAR TRANSPORT


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    Why 90 minutes

    Inelastic??

    Compulsory Usage

    No Close Substitute


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    PROBLEM 90 minutesAT 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.


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    INCREASING PRICE ELASTICITY OF 90 minutesPRIVATE 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


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    METHODS ………… 90 minutes

    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


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    So Whatever We do 90 minutes

    We’re not able to effectively deter

    People from opting for Private

    Car Transport


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    Because…….. 90 minutes

    • 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


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    Some Congested Pathways are a vital 90 minutes

    link – people would have to use them

    anyways. A toll on these roads give a

    direct impact and commuters make a

    switch.


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    REMOVE THE COMPULSORY NEEDS 90 minutes

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

    work from home wherever possible


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    BEHAVIORAL ASPECTS 90 minutes

    • 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


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    Initiatives to diffuse traffic congestion : 90 minutes

    • 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


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    If nothing else 90 minutes

    Increasing Road Space :

    Multilevel Roads

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


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    CONCLUSIONS 90 minutes

    • 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


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    THANK YOU 90 minutes

    Please mail your questions to

    [email protected]


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