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Who pays for the roads?

Print edition : Jan 17, 2003 T+T-
At a toll booth on the East Coast Road.-N. SRIDHARAN

At a toll booth on the East Coast Road.-N. SRIDHARAN

Under the neo-liberal paradigm in economy, essential public services come with a price that is prohibitive for the poor. The East Coast Road in Tamil Nadu is a case in point.

THE East Coast Road stretches along the coastline from the southern outskirts of Chennai, and goes on all the way to Pondicherry. Parts of it are scenic, with a lovely vision of the sea lined with swaying coconut palms; other parts are densely occupied and noisy with human habitation. The road goes through many villages and large numbers of beach resorts that are springing up almost weekly, and also crosses the heritage site of Mahabalipuram.

The road has recently been freshly paved and improved, with a smooth metalled surface that enables much more speedy movement of vehicles. Travellers from Chennai to Pondicherry now find their travel time much reduced and the journey more pleasant. But this improvement has not come cheap: the road is now a toll highway, for which all vehicles are charged what is a rather hefty sum for a relatively poor area.

Along the densely populated area just south of Chennai through which the road runs, the positioning of the toll-booth is critical. Those unlucky enough to have homes or workplaces just after the booth face substantially increased costs, even if they are day labourers or run small beedi and tea shops along the route.

Almost anywhere else in the world, the notion of a toll road implies the construction of an altogether new road, which does not replace or supplant an existing road, but adds to it. It is meant to provide an alternative faster and better means of travel, only for those who are willing to pay for it. So those who already reside or work along an existing road are not directly affected in terms of higher costs of transport. Similarly, shops, establishments and residences that come up along the new toll road then do so out of choice, and aware of both the advantages and costs of being on the toll road.

But in Tamil Nadu, the model seems to be a very different one. The existing road has simply been taken over and made into a toll road, albeit with better paving (though there is still no street lighting to speak of). In this process of conversion, there was no attempt to ask those whose homes and places of work are situated along the road, whether they would prefer a toll road, or to give them any choice in the matter. And of course, once the decision was made, there was no attempt at providing any sort of compensation for those whose daily costs of transportation have increased dramatically as a result, or those whose livelihood has been affected by the increased costs faced by customers in reaching their establishments.

This remarkable insensitivity to the needs and concerns of local people in a large infrastructure project, is typical of the way in which the development agenda is being set today in the country as a whole. The building of physical and social infrastructure assets has been one of the chief casualties of this.

At the national level, infrastructure investment over the past decade has been abysmally low. Central government spending on infrastructure development in real terms has been less than half of the level of the decade earlier, and even lower in per capita terms. State governments, which could have taken up the slack, have been starved of resources for any sort of development, and now face very hard budget constraints.

TWO principles now seem to govern the government's attitude to infrastructure provision in general. The first is that private investment is preferable to public investment (for which there is apparently "no money"). The second is that people should pay for the services they receive, and even implicit subsidies should be cut.

There are of course major problems with both of these perceptions. Nevertheless, for the sake of argument, let us accept them as they are. Consider the second proposition. Even if we agree that people should pay for the services they receive, there are two standard ways of dealing with this. The first is to make society as a whole pay through taxation. This is the standard way in which public infrastructure was financed throughout the course of the previous century.

It makes a lot of sense to adopt this method when there are externalities involved, which means that there are positive (or negative) effects of investment that cannot be retained (or compensated for) by the private investor. The presence of such externalities typically makes the provision of the infrastructure by private investors less than that which is socially desired. Much infrastructure is characterised by (often large) externalities and "public good" features, which means that it is impossible to exclude people from consuming it. Street-lighting is indeed the classic textbook case of a public good, since you cannot prevent someone who has not paid for it from benefiting from it. This is why street-lighting and a whole range of similar services have traditionally been the domain of public expenditure financed though taxation.

The other way of financing such expenditure is to make the user pay. This is the philosophy that is most dominant today, and it governs attitudes to almost all infrastructure provision, even in those areas that are characterised by high externalities. This approach has many pitfalls: the problems and costs of enforcement (or making sure that all who use the service pay); and the even more important issue of exclusion, whereby the poor effectively are denied access to basic public services when they are highly priced. This is clear in the case of health services and even electricity provision in States like Orissa.

However, if one adopts the second model, the basic presumption behind it is that of consumer choice. In other words, consumers must be able to choose whether or not they avail of the service or infrastructure facility being provided, based on quality and price considerations. While this is a problematic notion in itself, it is undeniably the philosophical basis of the current approach to infrastructure.

This makes it doubly surprising that we can have in the country new toll-ways such as the East Coast Road, which are driven by the notion of user charges, and yet do not allow those affected any choice in the matter. Curiously, then, this scenic route becomes yet another expression of the distortions and contradictions of the current neo-liberal paradigm in economic policy.