Economy

The Dynamics of Congestion Pricing

Public commodities are goods that are non-excludable and available for everyone to utilize. Everyone has access to it and nobody can be denied from using it under the pretext that they haven’t paid for it. These goods are non-rivalrous in nature, which is to say that the use of such a commodity by a person cannot limit its use for another person.

For instance, consider a park. Everyone who wants to enjoy this commodity has access to it and cannot be refused entry. And one person using the park doesn’t reduce its value for another person. But here is a possible complication. What happens when too many people are inside the park? It is obvious that people are not able to enjoy the fresh air, peace and quiet of the park. This is where the concept of congestion pricing comes in. It is essentially about charging the users of these public commodities. In this case, if the entry to the park is charged during the peak hours like during the evenings, it will reduce the number of people entering the park during this hour and increase the satisfaction derived for those who value the park enough to actually pay to get in.

Congestion pricing is all about charging the use of certain public commodities that are subjected to over-congestion due. The charge levied is a result of excessive use of these commodities and it ensures towards reducing the demand. This is essential because the overutilization of these commodities leads to a decline in their productivity. When the demand reduces, the congestion will also reduce but this will pave way for the development of more such commodities. This is a system that has been implemented in a few countries and a case study of these will help in envisioning such a model for India as well.

In most of the countries, congestion pricing has been implemented to control road traffic. Increased use of private vehicles is a primal cause and this not only creates congestion on roads but also increases pollution levels in large cities. Levying charges on these cars in certain highly commuted roads during peak hours can reduce congestion through these roads. Thus it makes the commute easy, quick and less exhausting for everyone. This has been implemented in cities like London, Singapore and Stockholm and has been viewed as a success. There can be several ways of ensuring that this system is modeled properly.

For instance, in London, cameras have been installed that track when and how many times a particular car has travelled through a road. This is recorded and at the end of the month, a bill stating the charges is sent to the car owners. Another model can be an installation of smart cards in cars from which money will automatically be deducted when they pass through the charging points. The charges would thus discourage the owners to travel in their own cars and it might result in car-pooling, using public transport or might even change their travel timings, which will reduce the peak hour traffic and also work towards reducing pollution.

Such a model can be implemented in a city like Bangalore, where the pattern of roads is star-shaped, and roads leading to the same destination eventually connect with each other. Hence, cars traveling to the same destination get charged equally. This will go a long way in reducing the daily problem of road traffic in that city. However, implementing this sort of a model in a country like India might also cause inconvenience for a lot of people. With such a huge population, this system would make a lot of people liable to paying such charges. This will also end up causing problems for middle and lower income groups who will perceive this as another tax to be paid. This extra cessation will also make people take these public commodities for granted, as now they will be directly paying for it, and it might create more damage to these commodities. This model definitely has scope in our country, but a proper implementation is required to benefit everyone.

Picture Courtesy- CityLab



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