Social Cost of Automobility | Sunil Dharan

Walking on Delhi’s streets has become a harrowing experience, what with the unending flow of automobiles, many of whose impatient drivers show scant regard for traffic regulations. The streets themselves have become narrower, effectively, with vehicles lined up on the sides. Even on the footpaths, pedestrians have to jostle for space with the cars and two-wheelers parked on them. Often it appears that there are more vehicles than humans on the roads.

This picture holds true for most cities of the country. Of late, there has been a phenomenal increase in the number of vehicles on India’s roads, driven largely by the growth of private vehicles – cars and two-wheelers. Not only has the number of cars gone up, the average car has become bigger in size, occupying more space on the roads.

The increasing number of private automobiles on the roads coincides with the rising prosperity of the rich and the upper middle class in the country. More Indians can now afford cars and two-wheelers, partly due to their higher incomes and partly because of policies that encourage vehicle ownership. But does the price of automobiles to their owners – the price at which they are purchased and the expenditure incurred in maintaining them – reflect their true cost to the society? This short paper argues that it does not. Automobiles inflict cost on the society, ecology and the environment which are not borne by their owners.

Increasing number of vehicles

Between 1991 and 2020 the total number of registered motor vehicles in the country increased 15 times. The largest increase was of two-wheelers (17 times) followed by cars, jeeps and taxis (14 times), the slowest growth has been of buses (6 times).[1] Of the total 326.29 million registered vehicles in India, as on 31 March 2020, about 75 per cent were two-wheelers, and cars accounted for about 13 per cent. Buses constituted a mere 0.07 per cent. [2] This indicates a clear preference for private modes of transport.

The number of registered passenger cars has gone up from 6 million in 2000 to about 42 million in 2021. [3] The annual sale of passenger cars is around 3 million.[4] This, however, does not mean that a large number of people own vehicles in India. According to the fifth round of the National Family Health Survey, conducted during 2019-21, only 7.5 per cent of Indian households own a car and 49.7 per cent own a two-wheeler. To be sure, many households have multiple number of cars and two-wheelers.

The increasing number of private vehicles in the country can be attributed to a number of factors. The unequal nature of growth that India experienced since the 1980s meant that the top echelons of the income spectrum experienced rising prosperity even as other sections lagged behind. India’s economic growth, which remained modest in the first three decades of planning, accelerated in the 1980s and incomes rose faster in the subsequent decades. But this growth has been accompanied by rising inequality. The top 10 per cent of the population saw its share in national income increase progressively from 30.7 per cent in 1981 to 57.7 per cent in 2022 and its share in wealth from 40 per cent to 64.6 per cent. The top 1 per cent increased its share in national income from 6.7 per cent to 22.6 per cent and in wealth from 12.5 per cent to 29.5 per cent over the same period.[5] The high and increasing demand for motor vehicles, especially cars, comes from this prospering upper middle class and the rich. The not so well-off settle for the more affordable two-wheelers. Even among this class there is a tendency to emulate the rich and buy cars.

Rising incomes at the top has been matched by increased supply of vehicles in the market. With the liberalisation of the economy, newer companies, including foreign producers, entered the market and they churn out newer models regularly. Companies also resort to ‘planned obsolescence’ to keep the market moving.

Apart from the above two factors, poor and inadequate public transportation system and easy availability of credit for buying automobiles have also contributed to the proliferation of private vehicles.

Cost of automobility

Automobility refers to the growing presence and use of automobiles in the society. This growing presence affects not only their owners but it shapes the society, economy, politics, environment and so on, around it. Having a vehicle of one’s own is a matter not just of convenience but also of prestige. Societal pressure forces people to not only own but also to upgrade their vehicles regularly. Automobility requires appropriate infrastructure to support it, thereby diverting investible surplus from other uses. The construction of this infrastructure has implications for the ecology and the environment. Moreover, automobiles consume fuel and pollute the air. They also occupy space. Incorporating all these factors, the cost of automobility turns out to be much more than what the vehicle owners bear.

Monopolisation of space

Monopolisation of public spaces by the private vehicles has been normalised to the extent that nobody even bothers to question it. Some housing colonies and markets in the cities have designated parking spaces. But in most places, one finds vehicles parked on the roads and on the footpaths. In some housing colonies, open spaces meant for walkers and playing children have been converted to parking lots to accommodate the teeming number of private vehicles.

Even on the roads private vehicles contribute to traffic congestion. In fact, the bigger the vehicle the more its contribution to congestion. The bigger automobiles on the roads put at risk not only the smaller ones but also the slow moving non-motorised vehicles. Cycling is a luxury on Indian roads at present.

Such takeover of public spaces by the vehicles denies others access to that space. Public space, by definition, belongs to the entire society. Moreover, given the skyrocketing land prices in the Indian cities, this is a huge subsidy enjoyed by the vehicle owners.

Road construction

With the increase in the number of vehicles the road infrastructure has to be continuously upgraded. Existing roads have to be widened, new roads have to be constructed and with private cars becoming the preferred mode of long-distance travel for the higher income groups, highways and expressways have to be built. Road construction has been proceeding apace in India for some time. For instance, between 2014 and 2023, National Highways network alone increased from 91287 km to 146195 km – an increase of 60 per cent.[6] The present government claims that the pace of construction of highways has increased from 12.1 km per day in 2014-15 to 33.83 km per day in 2023-24.[7]

Construction of roads is highly resource intensive. Land has to be diverted from agriculture and other activities for roads. Besides a variety of inputs – asphalt, bitumen, gravel, sand, concrete, crushed stone, iron, steel etc. – are required for construction. Apart from the financial costs, this intensifies mining, quarrying and sand mining with adverse consequences for the ecology and the environment. Besides, road construction also contributes to air, soil, noise and water pollution.

Emissions

Emissions is an obvious externalised cost of automobiles. Vehicular pollution is a major source of air pollution in India, especially in the cities. Tailpipe emissions of vehicles consist of carbon dioxide, carbon monoxide, nitrous oxide, hydrocarbons and particulate matter that pollute the atmosphere. Vehicular emissions is a significant contributor to the spike in air pollution in Delhi during the winter months.[8] In the year 2021, passenger cars accounted for about 25 per cent of the total CO2 emissions in India. Two-wheelers and three-wheelers combined, despite being much larger in number, contributed to around 20 per cent.[9]

Norms are in place for permissible emissions per vehicle and they have been arrived at from ambient air quality standards. But these norms fail to keep the overall concentration of pollutants in the air within the maximum permissible limits, as the number of vehicles goes on increasing. Even with the stringent BS VI emission standards the contribution of automobiles to air pollution remains significant.

To reduce emissions, people are being encouraged to scrap their old vehicles and buy new ones. Following a Supreme Court order, diesel vehicles older than 10 years and petrol vehicles older than 15 years are prohibited from plying in Delhi-NCR. The Govt. of Delhi gives rebate on motor vehicle tax and registration on purchase of new vehicles after scrapping old vehicles. Under Government of India’s vehicle scrappage policy, all vehicles must pass a fitness test after a specified number of years – 20 years for private vehicles and 15 years for commercial vehicles – to get their registration renewed.

Scrappage policies help to reduce the proportion of older vehicles on the roads thereby bringing down emissions. Inducing people to scrap their old vehicles and to replace them with newer ones also helps to keep the automobile market moving.

It is perhaps true that new and more sophisticated engines are more fuel efficient and less polluting than the older ones. But production of automobiles is highly resource intensive. Steel, aluminium, plastic, rubber, glass are some of the materials in automobiles. Moreover, the production process itself emits carbon. Given this, scrapping of vehicles in working condition is highly wasteful. It might be argued that materials from old vehicles could be recycled and reused. But evidence suggests that the recycle rate of metals is low.[10] In such a scenario, early scrapping of vehicles will increase the extraction and use of metals and will have little net positive impact on the environment.

Are Electric Vehicles the solution? True, they do away with the direct emissions but all the other costs mentioned here hold for electric vehicles as well. Moreover, EVs require lithium, cobalt and copper for their batteries which are not only scarce, their extraction is highly damaging to the environment.[11] Also, the major source of electricity in India (about 50 per cent) is coal-based thermal power plants. [12]

Average speed

Traffic congestion has brought down the average speed of travel in Indian cities. At present, the average speed of travel in Delhi and Mumbai is 24 km per hour and in Bangalore it is 18 km per hour.[13] Incidentally, Bangalore has the highest number of registered cars among Indian cities. In Bangalore about 1.6 lakh crore new private cars were registered in 2023-24 as against 36000 in the previous year. [14]

Slowing speed of traffic further increases emissions and contributes to worsening of air quality.

Policy implications

The social cost of an economic activity is its private cost (cost incurred in doing that activity and typically borne by the economic agents involved in it) plus the external cost (cost borne by other economic agents or the society as a whole because of that activity). According to mainstream economic theory, if the social cost of an economic activity is more than the private cost, the level of activity is socially sub-optimal. In the present case, the number of vehicles on the road is sub-optimal. It is more than the optimal number.

The role of the government here is to adopt measures to restrict the number of vehicles to the optimal level. One way of doing that is to levy a Pigovian tax, a tax on vehicles equal to their external cost. This will help to bring down the externality. Moreover, the money generated thus can be used to develop good quality public transport system.

Government response

However, the government’s response has been the exact opposite. The reasons are not far to seek. According to a Government of India press release in 2023, it aims to double the size of the automobile industry by 2030.[15] In 2022-23, the automobile sector contributed about 7.1 per cent of GDP, up from 2.7 per cent in 1992-93, and it accounted for about 49 per cent of manufacturing GDP.[16,17] Any slowdown in this sector has the potential to bring down the rate of economic growth.

(Author: Sunil Dharan is Associate Professor of Economics, Motilal Nehru College, University of Delhi)

End Notes

[1] Road Transport Yearbook (2019-20), Ministry of Road Transport and Highways, Government of India.
[2] ibid
[3] Transitioning India’s Road Transport Sector: Realising climate and air quality benefits, International Energy Agency and NITI Aayog 2023, available at www.iea.org
[4] ibid
[5] Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi (2024): Income and Wealth Inequality in India, 1922-2023: The Rise of Billionaire Raj, Working Paper No. 2024/09, World Inequality Lab, Paris.
[6] Press Release, Ministry of Road Transport and Highways, Government of India, 9 January 2025. https://pib.gov.in/PressReleasePage.aspx?PRID=2091508
[7] ibid
[8] Delhi’s air pollution: vehicular emissions top contributor, says study, The Hindu, November 07, 2024
https://www.thehindu.com/news/cities/Delhi/vehicular-emissions-top-contributor-to-delhis-air-pollution-study/article68838055.ece
[9] Transitioning India’s Road Transport Sector: Realising climate and air quality benefits, International Energy Agency and NITI Aayog 2023, available at www.iea.org
[10] Recycling Rates of Metals – A Status Report, UNEP, Nairobi, Kenya, 2011.
[11] Kohei Saito, Slow Down: How Degrowth Communism Can Save the World, Weidenfield and Nicolson, London 2024, pp 48-50
[12] https://powermin.gov.in/en/content/power-sector-glance-all-india#:~:text=Performance%20of%20Electricity%20Generation%20(Including,a%20growth%20of%20about%208.87%25.
[13] Nagarjun Dwarakanath, Average traffic speed in Bengaluru improves, but still worse than Delhi and Mumbai, India Today, February 5, 2024
https://www.indiatoday.in/india/story/bengaluru-traffic-speed-mumbai-delhi-average-traffic-speed-2497696-2024-02-05
[14] Garima Prasher, 340% rise in number of private cars on Bengaluru roads, Bangalore Mirror, April 13, 2024
https://bangaloremirror.indiatimes.com/bangalore/others/340-rise-in-number-of-private-cars-on-bengaluru-roads/articleshow/109254978.cms#:~:text=%E2%80%9CA%20major%20part%20of%20the,to%20last%20year%20is%20phenomenal.
[15] Press Release, Ministry of Heavy Industries, Government of India, 17 February 2023.
https://static.pib.gov.in/WriteReadData/specificdocs/documents/2023/feb/doc2023217160601.pdf
[16] Government of India, Economic Survey 2022-23
[17] Press Release, Ministry of Heavy Industries, Government of India, 17 February 2023.
https://static.pib.gov.in/WriteReadData/specificdocs/documents/2023/feb/doc2023217160601.pdf