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Low cost, high risks

Low cost cars may save energy compared to bigger cars and SUVs, but their bloated numbers will undercut the fuel savings possible from more fuel efficient two-wheelers, writes Anumita Roychowdhury.

india Updated: Dec 20, 2007 22:23 IST

The veil over the Rs 1 lakh Tata car will be lifted soon. The Tatas may even be joined in the cheap car stakes by other players to entice first-time car buyers and two-wheeler owners. A billion cars for a billion people is the industry axiom. And why not.

The World Energy Outlook 2007 of the International Energy Agency (IEA) has alerted that India has just crossed the tipping point of per capita GDP of $ 3,000. Once this threshold is reached, vehicle ownership rates will escalate rapidly. And the IEA has not yet factored in the implications of the Indian car industry racing to the bottom to compete on costs to shorten the fuse further.

The new price strategy plans to create a new class of buyers across cities and suburbs. The rising GDP has boosted purchasing power across India. In fact, the demand estimated for rural households in the next one year is 1.5 lakh cars. That equals the total number of cars sold during 2006-07 in the country. Market watchers anticipate that additional 30 million households will be able to buy a car by 2010. Cheap cars will make it easier. The industry argument is that frugal engineering, low cost skills and material, and volumes can make production of very low cost cars possible in India. It is an opportunity at a time when car penetration is as low as seven cars per 1,000 persons. Build volumes at the lower end, at a lesser margin and still remain profitable — that’s the strategy of the cheap car.

But what can the abnormally low price mean in terms of emissions performance, durability and safety? The industry meets the law of the land, but the law of the land itself is weak. Scheduled to hit the market in 2008, these cars will hit the roads much before Euro IV emissions standards are in place. They will meet Euro II emissions standard in smaller cities that are a decade behind Europe, while Euro III standards will be applicable in major cities that are five years behind Europe. But more than half of our cities have critical levels of deadly particulates. Thirty per cent of our cities have nitrogen dioxide (NO2) levels that have moved up from low to moderately high. Small cities and towns, now scaling the pollution peaks, are most vulnerable to the explosive increase in cheap cars.

The pollution impacts can be much more severe if cheap cars are also allowed to run on cheap diesel fuel. Emissions data available from the Pune-based vehicle certification agency, Automotive Research Association of India, shows that the actual emissions levels of even Euro III diesel cars are enormously higher than petrol cars. Diesel cars emit 7.5 times more particulate matter, seven times more air toxins and treble the amount of NO2. Personal cars are taking unfair advantage of the official policy of keeping taxes on diesel fuel low for agricultural and freight use. Without clean diesel, vehicles that run on diesel should not be allowed to proliferate.

Buyers still do not know if the Rs 1 lakh tag dream can survive once the key safety requirements for cars become mandatory. These include the full body crash test that determines how the car crumples at the time of collision to minimise harm to the riders, impact-absorbing features like air bags, anti-lock braking systems etc. Currently, Indian buyers are not even informed of the safety status of the cars as is done in Europe.

Cars enjoy an enormous hidden subsidy in India. Public policy does not aim to recover the full cost of owning and using a car. For instance, the cost of using urban space for parking and using roads, not to mention adding to pollution and the subsequent health hazards, are not reflected in the taxes and road pricing. At the same time, the car industry is constantly minimising its tax contributions and externalising the true costs of its products. A 2004 World Bank study shows that the total tax burden per vehicle kilometre is 2.3 times higher for public transport buses than cars in Indian cities.

The only way cities can prevent clogging of roads is to scale up efficient public transport and put in force effective tax policies that make car usage very expensive. But public policies have not moved adequately on this. In fact, the urban infrastructure development scheme for small and medium towns does not even accept urban transport schemes and rolling stocks of buses and trams as eligible items for central funding. As it is now largely left to the people to organise their transport in cities, the incentive of cheap small cars can be overpowering. Already, crawling traffic is the most visible sign of congestion. In key arteries of big cities, peak traffic volume has already oversaturated the design capacity of the roads.

Low-cost small cars present big dilemmas. They may save energy compared to bigger cars and SUVs, but their bloated numbers will undercut the fuel savings possible from more fuel efficient two-wheelers. And as they begin to pirate travel trips from public transport, cities will choke with pollution and congestion. If public policy fails to counter the problem of cheap motorisation, air pollution, congestion and public health impacts can cost any city its competitive edge and destroy it.

Anumita Roychowdhury is Associate Director, Centre for Science and Environment.