Road User Charging and Congestion Zone Charging - Essay Example

Road User Charging      History and Background  The governments had been undertaking construction and maintenance of roads throughout the history of the mankind.  Due to shrinkage in plan expenditure on account of ever increasing pressure on non plan expenditure, the governments have been forced to find ways and means for raising funds for infrastructural developments, including construction and maintenance of roads. From the early 1900s, fuel tax was the major source of user based revenue for the governments, for use in construction of national highways.  However, the rise in fuel cost over the period of time, its cascading effect on inflation, etc. has resulted in resistance from the public, for further increase in taxes.    Therefore the governments have considered various alternatives to meet this infrastructure cost, since the economic development of the country hinges on the development of the infrastructure.  There are various attributes to road transportation such as distance in traveling, size and weights of the vehicles and the loads the vehicle carry, parking, peak hour timings, types of fuel used, traffic level, etc.  Developments in technology in the meantime, made the measurement of the usage with reference to various attributes, easier.  The equipments made available to the transport development authorities, research in transport and logistics sector, development of Global Positioning System (GPS),use wireless data technology (GPRS), etc. have refined the system of measurement.  This gave way to a new system to charge based on the usage of highways by various categories of the vehicles.  The charges based on distances traveled are in vogue in many countries, as it is felt more relevant, easier to implement and control.  Establishment of toll gates and installation of new equipments and systems at the convenient entry points is also a part of the development.       Objective  A comprehensive study has been made with reference to levy of charges, the purpose of levy, its justifications and implications.  It is also to study the real intention of the government in introducing congestion area charging, and the efficacy of the scheme in addressing the needs or problems of the society, and to recommend the steps required to be taken to achieve the goal or objective.  Road User Charging Road use results in damage of the roads, congestions on account of traffic, pollution on account of emissions and accidents apart from normal wear and tear associated with the climatic conditions such as snow and rains. Pricing of road is a complex phenomenon.  Every form of transports uses fuel.  However, differential pricing system at the point of sale of fuel, to recover the cost allocated in relation to maintenance, is very complicated for the obvious reasons.  Already, basic fuel taxes in the form of sales tax or excise duty is suffered at the points of distribution of fuel in various countries. Lindberg, G. stated, ‘the expected short run marginal cost is equal to the average maintenance cost. This was labeled the Fundamental theorem. The Fundamental theorem has had a strong influence on transport policy. With a social short run marginal cost equal to the average maintenance cost an efficient pricing policy can be introduced through a simple cost allocation model only focusing on maintenance expenditures. This is the backbone of the European Union legislation’ (2004) Smeed Report is a mile stone in the study of Road user charging in U.K.  According to the report "The road user should pay the costs that he imposes upon others". (1964)The report also recommended ‘road pricing’ based on usage and other factors.  Sorenson, P. noted, ‘The motor fuels tax has numerous merits, and many observers believe that it will remain the mainstay of the transportation finance for years to come.’ (2005) Levy of charges is dependent upon so many factors and the specific details in terms of the area, time and price are beyond the scope of this study.  However, the determinants in this respect are important for understanding the issue in its totality. Emission levels or standards such as Euro 3 and Euro 4, number of axles, tracking of traffic through satellites, advance payment of tax through passbook system, timing and dates related to congestion, photo sensors for movement in a zone with reference to the number of entries into and exits from the zone, etc. are involved in the process.  When there are increased numbers of vehicles used in a road, the maintenance cost increases. In addition the roads and bridges also need repairs and maintenance on periodical basis on account of damages caused due to normal wear and tear, rains, snow, accidents, etc.  Line paintings and road markings on highways, traffic lights, signaling system, etc. involve regular expenditure.  When the conditions of the roads are poor, the cost of maintenance of the vehicles increases for all the users.  Lorry Road-User Charge ‘The proposed charge will apply to the use of UK roads by all lorries over 3.5 tonnes. Rates should be structured so that heavier and more polluting lorries pay a higher rate. It has also been decided to simplify the proposed charge so that it has no more than two basic rates (one for motorways and one for other roads) at least initially ...’  (Department for Transport, HM Customs and Excise, 2003)  This charge is levied based on the distance used by the lorries (over 3.5 tonnes).  Lorry road user charging has been introduced in most of the European countries, and the Switzerland introduced the system in 2001.  Payment procedures vary.  For example in New Zealand, ‘To pay the charges, you purchase a RUC licence, based on the vehicle type and weight. For most diesel cars, utes and vans, you need a distance licence, which you purchase in 1000km units (or multiples of 1000). You must buy a new licence before you’ve driven all the distance covered by the previous licence. If you carry heavier than normal loads for a short distance, you can purchase a supplementary licence in 50km units.’ (NZ Transport Agency, Updated: 15 February 2010) Congestion zone charging: The scheme was introduced in Central London in 2003.  Payments can be made in advance.  Discount is available for monthly or annual charges with provision for refunds in certain cases.   The congestion charge is a £8 daily charge to drive in central London between 07:00 and 18:00, Monday to Friday excluding Public Holidays. Its designed to reduce traffic and raise money to improve transport in London. (Visit Britain) Costs involved    Cost with reference to the concept ‘road-user charging’ is related to recovery of the cost of maintenance of roads, bridges and other connected properties employed in the road transportation by the government. Newbery, D.M.G. observed ‘Recent research suggests that the efficient road damage charge is only about 40 percent of the total damage, but that congestion costs may more than compensate for this shortfall. This is confirmed for the United Kingdom, where the efficient charge for cars is shown to be higher than their allocated cost, but for heavy goods vehicles is about the same. Accident costs may substantially raise these figures.’ (1987).   The cost involved in the implementation of the system is different, and is staring on the face of the government. For a moment, if we ignore the ‘cause and effect’ with reference to the users or community as a whole, and simply list out both the tangible and intangible costs, we can understand the true picture, as we can only compare the level of satisfaction, convenience or hardships endured and not compute the same. Moreover, quantification is not a continuous process required in day to day life even it is possible, as long as the need does not arise for possible action on the part of the parties concerned in this respect. Time wasted by people in toll gates, tolerating delays and emissions when there is obstruction in the traffic, roaming around the places for parking the vehicle, hardships in correctly paying the charges to avoid penalties, payment of penalties, etc. are just few of the examples.  Fairness in allocation of cost is again questionable as it has a cascading effect of increasing the prices of the consignments to the consumers like any other tax on business, though this argument is lacking in conviction. Weakness in the system Any system, that appears to be exceptionally good at the conceptual stage, is bogged down by the weaknesses, if they are not identified and addressed properly. It should be understood that these are the inherent weaknesses in any public system. The manpower requirement, maintenance of records, verification of the records, enforcement of the law, implications on failure of implementation, scope for discretion and subjective decisions, preservation of the records as per the law of the land for future reference, etc. is compelling us to revisit, not the strategy, i.e. recovery of the cost from the users, but, the modus operandi. There is no second opinion about the social justice behind the principle of the levy of charges.  However, it should not be at the cost of inconvenience to the public at large.  In such an eventuality the best intentions on the part of the government is frustrated.     Recommendations  Our recommendations have three parts.  The first part is related to the efficient implementation of the road user charging. The recommendations are in tune with the recent developments in the field of communications and technology.  We have discussed how these developments could be used for the efficient implementation of the scheme. In the second part we deal with the causes of congestion, and how it could be regulated.  The situation warrants for precaution, prevention and preparedness. It should be understood that levy of road user charging arose out of compulsion to recover the cost incurred in road maintenance and development.  But, congestion area charging is different in scope.  It is earnestly hoped that the congestion could be curtailed by congestion charging.  The congestion charge should act as a ‘disincentive’ to use the road in a particular area.  However, the government can’t keep quiet, and there should be some follow-up action to avoid anarchy.  It is in this connection a system of time allocation is proposed in detail.   Our third recommendation transcends away from road. If the basic causes for congestion in road are properly addressed, the system could be strengthened by relieving pressures on congestion by exploring the alternative methods of transportation. Low cost air travel should be encouraged by extending tax benefits, credit facilities, etc. to the low cost carriers  Tracking device A tracking device, if it becomes mandatory and fitted into the vehicles, using Global Positioning System with software for tracking, mapping and recording, and linked to the central transport monitoring system should be the solution to an equitable and efficient road user charging. “…Tracking by intelligent way, i.e., when stop and when in moving, the device report data at different rate, and there is a sleep mode to save power. --Optional SMS tracking and control. --Dual data communication capability through GPRS and SMS. Real-time GPS tracking and vehicle status monitoring…” (Directions Magazine, 2010) Fleet operators in private sector are already using such devices, and it has become an integral part of the ‘logistics’ industry in the developed countries.  Once it becomes statutory, the manufacturers will fit the devices with the minimum required facilities as required by law, and leaving the choice for advanced devices to the customers.  Monitoring centers established zone wise throughout the country would also be in a position to oversee the movements, and divert the traffic wherever required.  This system could also be useful to the law enforcing authorities such as police and coast guards to track any vehicle immediately without loss of time, as there are more facilities available in the vehicle other than number plates, which are depended upon hitherto for tracking!   The chief benefits of this recommendation would be reflected in the cost saving measures.  Numerous form, manpower and facilities used now for this purpose could be diverted for use in other areas.  Taxation at multiple points results in frustration to the public.  Many a times, the system is conducive for favoritism and corruption, since there is an element of discretion involved at various stages.  However, if the automated system is put to use, the user will receive a single bill during the month. The distance traveled, travel in various zones in relation to congestion, travel at various times in relation to its movement, parking at different locations, etc. are already recorded and the different uses could be properly priced as per the records.  The simplicity of the system lies in its application.  The system will work wherever the mobile phone or internet works.   If the vehicle, i.e., the system is outside the coverage area, obviously there is no question of time or congestion involved in relation to intensity of the traffic, and as far as the distance is concerned, the speedometer takes care of that aspect!   The engineering particulars of the vehicles in connection with the levy of charges such as emission standards or levels, number of axles, the type of fuel used, even weight of the vehicle with the load and without load, etc. are already available in the system.  Therefore, verification of such details physically or with the records by the officials is completely dispensed with.  The drawbacks in the existing system such as resistances from the users to the payment procedure, resentment on account of overcharging, or complaints about the users who are charged less, etc. are avoided.  In fact for the people whose utilization of the vehicle is very limited, charges simply based on usage would be a welcome measure.  Moreover formalities to be complied with at every stage with the government officials are also avoided.  This can also be viewed from another angle.  It is always a nuisance to carry cash in hand to meet the requirements at toll every time.  Moreover, there may not be facilities available at the toll booths to accept credit or debit cards.  The difficulties are compounded if the credit as per passbooks or prepaid tokens either expired or fully utilized.  This system also allows the public to include such expenses in their monthly budgets, since they will come to know their monthly payment approximately based on their experience.  They can also find out the charges payable as on date from the device. In fact many people would like to give standing instructions to their bankers for settlement of the bills.  Time allocation The government should introduce a system for time allocation to various organizations and institutions such as schools, colleges, commercial undertakings, factories, etc. in the congestion area zone, for the efficient use of road, since ‘road’  is a scarce resource like petrol, water, etc.  These major categories of road users should file applications with the governments for approval of their timings, such as opening time and closing time during the day and shift timings along with the list of holidays during the year.  Considering the congestion and other factors, the authorities should approve the timings of these organizations.  Wherever necessary the respective organizations should be advised to change the timings, say by advancing the timing by half an hour or postponing the timing by 45 minutes for example.  This is to regulate the flow of traffic in the arterial roads of the city. Time study: For the above purpose the government should embark upon an elaborate time study to assess the inflow and outflow of the traffic (entry and exit of vehicles from the road) `at various points of the roads in 24 hours of the day.  This will enable the time allocation authorities to regulate the time of opening and closing of the organizations and institutions with reference to the use of road.  Optimum utilization criteria: The government should evolve optimum utilization criteria for road use.  A particular road should be divided into many sections depending upon the junctions, subsidiary roads branching out of the road or joining the main road, etc. For example the road connecting A and D may be divided into three sections. (A to B 1.2 mile, B to C 1.6 mile and C to D 0.9 mile) Then based on the traffic history, congestion in traffic, peak hour traffic, normal traffic, etc. the maximum usage possible, without hindrance to the flow of traffic, in the road and the optimum utilization levels for efficient use of the road should be worked out.  The aim should be to develop a plan to limit the traffic within the maximum usage level.  However, the time allocation policy referred above should aim to regulate the flow to the optimum level by efficient time allocation. Alternative transport facilities When a person is reachable wherever he is, and the person in turn reaches the world, what can attract the people to the specific areas, which could result into congestion? It could be recreational facilities, liaison with the government, international trade, etc.  When communication is not an impediment for a person to live wherever he wants to live, it is probably the transportation which is the deciding factor for a person to choose city living.  The air travel as an alternative transport facility should be encouraged by the government.  The travelling by air is swift, and it is also cheaper. A person living in a county far away from London in terms of road travel, could use this facility and prefer to stay in countryside.  Therefore, this strategy involves important policy decisions in relation to construction of airports at various towns and encouraging air travel by concessions in taxes, fuel subsidies, credit facilities, concessions in income tax, etc. for setting up of new companies in this sector Implementation of the recommendations  A two pronged approach recommended would make the road-user charging efficient, and make it a good source of revenue for the government with minimum overheads.  The time allocation concept seeks to attack the causes of the problem for efficient road management.  Efficient road management is very important for a healthy society.  Pick up in low cost air travel would reduce the pressure on roads.    Consequences  In the long term, the society must adjust itself to these emerging issues borne out of urbanization to diffuse the tensions and frictions.  However, it is important to note that the involvement of the government to regulate the process is essential.  There are two consequences that may arise out of the situation, Decentralization and   Labor migration.  These two eventualities are not mutually exclusive, and a proper mix with astute planning on the part of the government would ensure smooth transition and pave way for economic development.  In fact, these evolutionary aspects in the society should be treated as opportunities, rather than challenges with proper long range planning.  The various stakeholders such as employers, employees, business community, transport authorities and the government should be in constant interaction, discussions and debates with each other and together to evolve suitable strategies for the planned and organized development. Decentralization  Urbanization brought with it several problems to the society and the chief among those problems is transportation.  This transportation problem coupled with other issues such as water scarcity, drainage and sanitation problems, pollution, increase in housing rents, parking problems, children’s education, etc. put great put great pressure into the system.  All problems are interconnected are related to each other, either directly or indirectly.  These problems could not be treated in isolation without giving any regard to the other.  If the people are reconciled to a particular issue, here for example, road user charging and get used to this burden, the consequent pressure on other issues defeats the very purpose of such charges, and it loses its strategic value in the process.  Though the aim of the government is to recover the cost involved in this process, the motive behind this action is different.  The purpose of this levy is, introducing an element of ‘disincentive’ to use the road indiscriminately, and to encourage prudence on the part of the users in use of roads keeping in mind, the welfare of the society at large.   Therefore, when the road user charges are accepted by the public, it is not resulted into producing the desired result, and the objective is defeated.  This would lead to pressure on those factors such as parking space, pollution, etc. directly connected to the issue and the other factors such as house rent, sanitation, etc. indirectly related.  In order to tackle the problem we have to attack the root causes of the problem.  The number of vehicles using the road has increased manifold.  But, the roads could not be expanded in proportion to the increase in vehicles.  This is the basic problem.  Urbanization in the society attracts people from the countryside and small towns to the cities.  This is due to the opportunities available in these cities. The infrastructure facilities available in the cities are the primary reason for setting up of business and industrial establishments.  Hence, the meaningful and planned decentralization is the key to the solution.  Creation of economic development zones which are away from the city, but properly linked to the cities by air is very important to tackle the problem in the long run. Another approach in decentralization could be decentralization of the activities within the city by establishing satellite offices in the suburban areas by splitting the functions and shifting such functions to these satellite offices without affecting the flow of work.  This system has got dual advantages.  The rent and the other cost of facilities, lower in less congested areas, results in lesser overheads for the employer, because the satellite office does not need prime location even in a suburban setup.   The savings in cost of transportation, lesser rent and other cost of facilities, time and efforts saved in transportation would benefit the employees as well.  The government on its part can reduce the license fee or other taxes related to the satellite offices to encourage the companies to set up satellite offices.  The employees should be educated to understand the benefits of this proposal.  For example, the back office functions, accounts, budgeting, etc. are some of the functions that could be gainfully shifted to the satellite offices. Yet another approach is working from home.  A person doing a routine job of replying to the mails received by the company, need not come to office, all the way from his house swimming in the traffic, to do his/her job and go home after finishing the day’s work on daily bases, if he is given facilities to accomplish this task sitting in his home.  After all 90% of the office work to-day is done through the computer.  The data is accessed from the computer, work on this data is done in the computer and the finished work is stored in the computer. This could be accessed by the various users in the organization through internet.  For personal clarifications and communication, the employee could be contacted over phone, if necessary in conference mode. A person’s responsibility is more or less defined in any organization, and in most cases it is immaterial whether it is done from one place or another.  If this plan is considered by the companies seriously, it would be a ‘revolution’ in the management.  The attendance concept, office facilities such as use of fans and A.C., supply of snacks and coffee, etc. are dispensed with, and the salary for the period is credited to the bank account of the employee. Another important advantage would the space requirement for the office is also reduced considerably. Even the schools can drastically reduce the ‘present’ time of the students, and shift some of the portions for study through computers in home. Migration of labor So far migration of labor from the countryside and small towns resulted into congestion in the cities.  However, a reverse migration process may set in soon.  Unless the government with foresight comes out with suitable plans to deal with the situation, this would have a serious impact on the economy.  The cost of living in cities is increasing day by day, and the disposable income of the people, especially middle class is marginal.  Pollution, congestion, etc. in cities is already making the life miserable and difficult.  If an exodus starts whereby the people desert the cities, it may result in labor shortage.  Exodus of low paid labor employed mostly in health, sanitation, etc. would result in serious administrative problems in the society.  Though this eventuality is very remote, it can’t be ruled out.     Encouraging migration: This is an excellent option, if it is approached with imagination and proper planning. Industrial revolution brought discipline and punctuality to the business. The basic structure of the society in the history was molded to aid this process. To cater to the needs of the changing environment, the structure of the society has fallen in sync with the requirements of the industrial revolution.  However, the facts of the life as on date call for revisit to this approach.  The emergence of cell phones and internet culture made the distance immaterial. When a person sitting anywhere in the country, for that matter, anywhere in the world can engage in business or trade internationally, why not employment on these lines?  The way of doing things and communication under the changed circumstances should have mitigated the problem of congestion with reference to transportation. However, it is yet to be reflected in the society.  There could be multifarious reasons for this paradoxical situation.  But, the chief among these reasons could be poor understanding of its implications, especially by the government.  Balanced growth and development based on the advancements in technology can’t happen automatically.  But, the stage is set for this purpose.  The initiative on the part of the government in dissemination of information, effective planning and the implementation of the programs would speed up the process. Though there is no evidence or backup to substantiate our view, it could be safely said that, for about75% of the people, employment should be the primary reason for their living in these cities.  If the employability could be achieved even after migration out of the city, the people should logically prefer to move away from the city, but for reasons such as children’s education, own house bought by the person or ancestral property.  Implications: Apart from the implications discussed above in relation to the consequences, the direct implications of road-user charging are difficult to estimate. However, as a side effect to this scheme mass transit systems should be benefited.  For example the public would be encouraged to travel by bus.  The reduction in congestion, consequently lesser emission should augur well for the health of the communities.  Wherever the financial impact of the scheme felt severe for any business, they would work out alternative arrangements or diversify their businesses to minimize the impact.  But, it would be a welcome step if it results in prudent use of roads.  If it is realized that it is not the question of affordability as far as the use of road is concerned, but responsibility toward the society, it can be considered as a real progress. Conclusion The dictum "The road user should pay the costs that he imposes upon others" as propounded in Smeed Report is perfectly justified.  The road user charging underlines the spirit of human understanding.  But, the risk reward ratios should be properly analyzed and due consideration given, in the application and implementation of the proposal. While admitting the reasonableness in road user charging, it should be remembered that the public should enjoy the fundamental right to ‘freedom of movement’.  The free movement within a country cutting across various counties or states is as important as safeguarding the national borders of the country.  Any infringement in respect of free movement makes the later meaningless.  If the freedom of movement is restricted or impaired in a society, it would affect the growth and development of the society in the long run.  Therefore, the law of the land should never be viewed as an obstruction to the free movement in a society. Reflections  Private sector participation  The private sector participation in the road construction which involves huge outlay is a welcome step of the government.  ‘The Government will work in partnership with the private sector to introduce the charge. It will be working towards starting the tendering process in late 2003. In preparation for this, detailed analysis will be needed to refine the requirements of the charge.’ (Department for Transport, HM Customs and Excise, 2003). The governments have realized its limitations in engaging in businesslike activities, and there is a shift in policy making, that reflects the flexibility in the attitudes of the governments, not only in UK but, worldwide in this regard.       Build, Operate and transfer Budgetary constraints associated with political constraints prevent a government from undertaking new road and bridge projects which involves huge outlay and longer gestation periods.  The cost of recovery of the construction and maintenance expenditure incurred in the project is increasing to the government by way of salaries, overheads, investment on computers, equipments, office furniture and other facilities. Political constraints come into play on account of relatively small allocations possible in the budget for the road developments.  With an increasing proportion of allocations in government expenditure towards non-plan expenditure such as salaries, pension, defense purchases, etc. coupled with competing demands for projects from various constituencies for road projects and other infrastructural development projects the government is increasingly dependent on private sector for investments in this area.  As far as pricing of the usage, the private sector has to follow the guidelines issued by the governments in this regard.  The efficiency in implementation of the projects and toll collection in private sector ensures viability of the projects.  Role of the Government The private sector is roped in due to budgetary constraints, and to avoid additional burden to non-plan expenditure of the government.  However, considering the social responsibility of the government in these infrastructure projects, the role of the government in taking proactive measures to ensure economic development in the long run in this regard can’t be underestimated.     Reference   Directions Magazine, (2010), GPS/GPRS vehicle tracking system with tracking software and map, Available at http://www.directionsmag.com/companies/Honestrac_GPS_Technology/products/GPS]GPRS_vehicle_tracking_system_with_tracking_software_and_map/, Accessed on 30 April 2010  Department for Transport, HM Customs and Excise, (2003)Modernising the taxation of the haulage industry – lorry road-user charge, Progress report tow, Available at http://www.hm-treasury.gov.uk/d/lorry_roadusercharge_220.pdf, Accessed on 30 April 2010. Lindberg, G. (2004), The marginal cost of road use - the fundamental theorem revisited, Available at,  www.vti.se/4557.epibrw, Accessed on 1 May 2010. Newbery, D. 1987. Road User Charges in Britain. CEPR Discussion Paper no. 174. London, Centre for Economic Policy Research. Available at  http://www.cepr.org/pubs/dps/DP174, Accessed on 1 May 2010. NF Transport Agency (2010), Road user charges, Available at http://www.nzta.govt.nz/vehicle/registration-licensing/ruc.html, Accessed on 2 May 2010. Smeed, R.J. (1964). Road pricing: the economic and technical possibilities. HMSO. Sorenson, P. (2005), Review and Synthesis of Road-Use Metering and Charging Systems, Transportation Research Board, Washington, D.C. 20001, http://pubsindex.trb.org/view.aspx?id=776102, Viewed at  Accessed on 2 May 2010 Transport for London, Congestion Charging, Available at http://www.tfl.gov.uk/roadusers/congestioncharging/default.aspx,  Accessed on 30 April 2010. Tretvik, T. (2007), Design elements in road pricing, Available at, http://www.curacaoproject.eu Viewd on 30 April 2010. Visit Britain, Congestion zone charge, Available at http://www.visitbritain.com/en/travel-and-transport/travel-around-britain/driving-regulations/congestion-zone.aspx, Accessed on 2 May 2010. Read More