By: K Parthasarathi12/28/2007 8:32:27 AM
Views expressed here are author"s own and not of this website. Full disclaimer is at the bottom.(Author is a Chennai based freelance writer.)
As one belonging to lower middle class I was elated when I initially read about Tata’s endeavor to bring out cars at Rs.one lakh.On a careful retrospection, I am not sure whether it is really a blessing or a deep trouble to the nation. If Tatas succeed, others would not be far behind in rolling out similar models. The automobile industry is growing in India by leaps and bounds and is expected to grow fourfold. Market is awash with innumerable varieties of cars of higher horsepower that are readily available for spot delivery with easy finance from banks. The proliferation of these oil-guzzling cars is much more than what our roads can take in every city. With the expected Tatas cheaper cars at one lakh rupees soon on the roads, the chaos on the roads would be total. Cars will then replace scooters. The leading automobile manufacturers are making a bee line towards India considering its growing market, cheap labour, reduction in excise duty and also to make it their export hub. There is also saturation in developed countries.
Burgeoning automobile production: According to Automotive Components Manufacturers Association, the export of vehicles and auto components is envisaged to make a ten fold increase in a decade. Auto companies are setting up bases for outsourcing components and for exports from India keeping in mind the advantage in labour costs.Maruti is also into a major investment. The automobile industry has seen a growth of slightly over 16% in 2005-06 compared to the earlier year. Hyundai alone sold about 125000 cars in domestic market and exported 75000 cars. While we are happy that India has been chosen for the investment by the major auto manufacturers there is a doubt whether this is a boon or misplaced exuberance.
Rising price of oil: Petroleum consumption in our country has been increasing at a very steep rate from 84 MMT in 1997-98 to175 MMT in 2006-07. With our domestic production meeting hardly 50% of our requirement we are highly dependent on imports particularly for kerosene, Diesel and LPG. It is very necessary to conserve petroleum by judicious use. Alternative sources of energy for driving the automobiles will have to be found. We have not made big strides in Eco-friendly natural gas where transportation is a major hurdle and huge investment would be needed. The availability of natural gas itself in sufficient quantity to meet our growing demand is a question mark.
Likely impact on growth rate: The volatility in crude oil prices gives jitters to oil importing developing countries. High prices that have already crossed $90 per barrel will adversely impact on the growth of economy. The hunger for oil is growing faster than the new finds of oil wells or expansion of existing capacity. With the economies of developing countries growing fast there is an increased purchasing power in the hands of their people triggering the demand for oil. With a limited supply against this burgeoning demand the rise in prices of crude will not abate. The possibility of prices hitting $100 per barrel in a short time and going beyond cannot be precluded. The import bill of crude accounts forms sizable chunk of our revenue expenditure. We are not also able to recover the full cost from the users and oil is highly subsidized for certain sections. The oil companies will break down under the burden or the government will have to carry the load. Our growth will be seriously hampered in the event of the price escalating further or even remaining at the present level.
The mindless proliferation of cars adding to the cost of oil imports is a burning issue. One is not sure whether we have made arrangements concurrently for finding new domestic sources for oil and alternative fuels. With oil production already in the peaking stages, there is a view that it may be economically unviable to tap oil even if available. It is time we put a curb at least temporarily on the glut of cars for domestic consumption. While the production purely for exports is welcome, there is a need to discourage sale of cars in the domestic market beyond a limit by suitable tax measures based on the size and fuel efficiency of cars
Very limited road space: The one major problem that is not being addressed is the roads. Our major cities are choking from the mass of vehicles on the poorly maintained and inadequate roads. Rapid transit systems have not made much headway except in small measure in Kolkata and recently in Delhi. Even in these places they do not connect all places. The intra urban public transportation system of commensurate proportions is virtually absent with chaos a daily feature and total halt when it rains. Metros as in Delhi may not be the solution everywhere. The metro at Delhi is patronized by about 5 lakh passengers as against 15 lakhs envisaged. Given the present road space, our cities cannot afford to cater for this volume of private cars. The development of road infrastructure both intra and inter cities except for the golden quadrilateral is halting and slow constrained by lack of resources. This does not enjoy a high priority in the present scheme of things.
Develop public transport systems: There is a need to discourage use of personalized modes of private transport and to encourage use of public transport system. This requires both an increase in quantity as well as quality of public transport with dedicated lanes to meet the demand. Slow moving traffic should be kept off the main lanes. There is not much done in this direction. To discourage the use of personalized modes of transport, stiff congestion fee, parking fee, fuel taxes, and other measures should be introduced. Railways may have to augment its freight carrying capacity to cater to the transport of even wagon loads instead of insisting on rake loads.
Insist on high fuel efficiency: Growing traffic and limited road space have reduced peak-hour speeds to low levels in the business and central areas of many major cities. This also leads to higher levels of vehicular emission. Only cars with cleaner technology and stipulated fuel efficiency should be permitted to be sold. The motor vehicle tax should increase with the age of vehicle and vehicles beyond certain years should be banned on the roads. Production of private cars that use diesel should not be permitted. The growth in automobile and road sectors should go hand in hand to avoid chaotic and skewed development as at present.
Lack of parking space: It is not merely the high import bill, shrinking availability of fuel or the pollution the vehicles cause that give the worry but the scarce vacant space available for parking cars in urban areas. Most of the households in the middle and upper classes now have more than one car and many are parked on the roads encroaching upon the limited space available for pedestrians and the movement of vehicles. It would be imprudent to put 4 lakhs more cars annually on the roads (leaving aside the two wheelers and trucks) when the roads are not even 7% of area of cities. Imagine the chaos when cheap cars replace the two wheelers. One adverse offshoot is the gradual erosion of farmlands adjacent to the cities.
It is in this context we must view the impact of cheaper cars that Tata’s are planning to bring out. It is too late to stop it. But a holistic policy should be evolved in association with Ministries of Industry, Urban Transport, Railways, Petroleum and Finance. The states are also to be involved. We cannot plead for reduction of consumption of oil while permitting concurrently massive production of petroleum based vehicles. It is time the government addresses the problem of unrestricted increase in automobile production in the context of the high cost of oil imports and the scarcity of domestic energy and the totally inadequate road infrastructure in the cities. The other measures of major investment on roads, rapid transport systems, use of water ways should also get high priority.K Parthasarathi Feedback to author
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