How Can Congestion Pricing Solve Traffic Woes?

Image source: LiveMint

By Devika P V,

The term ‘congestion pricing’ is used to describe a distance, area or cordon-based road user charging policy around congested areas to reduce the use of private vehicles and increase the use of public transportation. Congestion pricing is also known as electronic road pricing. Drivers usually ignore the social costs of using the road and only calculate their benefits which result in traffic congestion and air pollution. Singapore was the first country to implement Congestion pricing in 1975, followed by London in 2003 and Stockholm in 2007. The need for congestion pricing is increasing every year due to many reasons, the main being population growth which affects the number of vehicles on the roads and causes delays, air pollution and increased fuel consumption. While the number of vehicles is increasing, the size of the roads remains the same. As of now, Delhi is considered to be the highly congested state followed by Mumbai, Bangalore and Kolkata. If India tries to adopt congestion pricing, it would help reduce the traffic congestion and pollution level which will in turn improve the quality of the environment. Also, the overuse of the roads will be minimised as drivers will divert to less-travelled routes or change the times they drive to avoid the cost.

The purpose of implementing congestion pricing is to divert the profits generated into building a robust public transportation system. However, pricing of the charge should be reasonable as people might react negatively to a high price. At the same time, low price might also lead to congestion charge to fail as the number of cars may not decrease. Therefore, a good pricing scheme is needed before implementing congestion pricing.

In London, cordons tolls are placed in areas where congestion increases during peak hours. The drivers pay the price through TAGS system or automatic vehicle deduction system. Introduction of such a system will have many advantages — it will improve the mobility in urban areas, save time, encourage people to use public transport, lower air pollution, give wider economic benefits and raise revenue, which can be diverted for maintaining public transportation. However, the move is not bereft of challenges. There are also disadvantages like lack of advanced technology, especially in developing countries. Additionally, if there is no sufficient public transport it will cause over- crowding and may become tough to administer, which might result in increased instances of evasions.

The key to successful implementation of congestion charges is to get public acceptance for the policy. This can be created by making people aware of the benefits of reduced congestion. Rule- based systems for changing prices appear to be more popular than those requiring political discretion. Ancillary benefits, including reduced environmental impacts, can in some cases help in creating acceptance and take decision on how much to charge. Another matter of concern is the cost of implementing congestion pricing. Congestion charges potentially raise substantial amounts of revenue, but at the same time it is costly to run the system. Some studies have suggested revenue neutrality with respect to congestion charges, but emphasising revenue neutrality may reduce policy flexibility. Hence, getting public and political support becomes the key issue in the implementation of congestion charges.

Devika P V is a Research Intern at CPPR. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research.