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Is the Nano what we really want?

March 27, 2009 11:45 IST

This week, the world's cheapest car, the Nano, was rolled out. The Nano has been marketed as an aspiration -- the right of every Indian to own a car. No quibble here. There is no question that an affordable car is better than an expensive one; or that a small car, being more fuel-efficient, is better than a big one.

No question, for that matter, that every citizen of India has as much right to a car as every citizen of America, where vehicle numbers are obscene: Some 800 vehicles for 1,000 people (old and young) against our measly 7 per 1,000 people.

But the issue is not the Nano. The issue is all cars and whether cars still are the future of the world economy, as they were in the past.

This launch comes at a time when the production of personal vehicles itself is becoming old economy. It is not surprising that the car industry has become the first big dinosaur of the 21st century.

Today, every country is working to bail out its automobile industry. The big four companies are still on the brink of closure.

There is a huge over-capacity in the world of cars -- sales are down and the industry is bleeding. You might think it is a temporary phase: Cars will zoom again, as recession blues turn pink. But this is far from reality.

The fact is cars could only make it big in the old-economy because they were highly-subsidised, or incentivised through cheap bank loans. If people could not afford the next car, the bank worked overtime to make sure the loans kept rolling, even if that eventually broke the bank's back.

But that is past. The future, too, will not be too different. The bank might recover, but the cost of fuel to drive the dream vehicle will not. Oil experts will tell you black gold prices will rise again, when the world economy re-boots.

Add to this what can only be called the mother of all subsidies -- the free-ride personal vehicles have got in the world to emit large amounts of greenhouse gases and pump them into a common atmospheric space. As the rights over the ecological commons will be determined, as they must, carbon dioxide emissions from cars of the rich will have to be limited and taxed. This will cost more. It will make driving more expensive.

The global automobile industry knows it is not our future. It is our past. Unfortunately, this message has not yet come home. Unlike the car-saturated West, we still have large numbers of potential buyers. But the fact is that in India, because of the even greater price-sensitivity, personal vehicles are viable only if they are subsidised to the brink.

Take the Nano.

My colleague Chandra Bhushan calculated that the incentives rolled out by Narendra Modi's government in Gujarat amount to as much as Rs 50,000-60,000 per Nano. In other words, its cost is so low only because the state has doled out huge largesse.

Every past and present automobile has got this benefit (more or less). We can afford a car because our government pays for it. We can also afford it because we are not asked to pay for the price of its running -- the tax on cars is lower than what buses pay in our socialist country. We do not pay for its parking, a cost, which, if added, would make us think twice before we bought or drove our new dream vehicle, whatever the variant.

As the Nano rolls out, think of how we subsidise the car and tax the bus. Public buses pay taxes as commercial passenger vehicles, each year and on the basis of numbers they carry. In many states, they pay a tax which is over 12 times than what the cars pay.

Think of the public transport bus service in your city and ask how much of its revenues go in taxes: Half, in most cases. Think also, that the same Tata company, that has managed to roll out the car of our dreams in record time, does not possess the capacity to manufacture the buses cities need. 

Such an old-economy approach becomes completely perverse when one considers that already today, and definitely tomorrow, the greater proportion of people who are or will commute are using and will continue to use public transport -- a bus or a train. Today, as much as half of rich Delhi takes a bus, and another one-third walks or cycles because it is too poor to even take the bus.

Think again about the car inequity in India -- 7 per 1,000 people. Can the government write off the costs -- Nano-style -- so that all can buy the car? Can the government pay for our parking, our roads and our fuel, so that all can drive the car? If not, then is the right, right at all.

The issue then is not the right to own a Nano. The issue is the right to a slice of the public subsidy so that everybody has the right to mobility. There is no other right. Right?

Sunita Narain
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