Cambridge International as and a level Economics Ebook

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Cambridge International A Level Economics

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SELF-ASSESSMENT TASK 
8.2
A tale of two cities: Delhi and Singapore
Contrary to what many may believe, the worst traff ic 
congestion is to be found in emerging economies that are 
experiencing a boom in car ownership. India’s capital, 
Delhi, is no exception.
Recent reports suggest that very shortly peak traff ic 
speeds will be little more than 5 km per hour. Delhi’s 
congestion problems are the worst in the whole of India 
and four times worse than Mumbai. The problem is on 
the demand side; Delhi has more than six million vehicles, 
with 1,200 new ones being added each day. At the same 
time, the supply of road space lags behind. This can only 
have negative results: commuter stress, loss of valuable 
working time, excessive exhaust fumes polluting the air 
and wastage of fuel. The only way out in the eyes of the 
current administration is to pump money into the public 
transport system. By 2020, if Delhi is to not be facing 
gridlock, public transport needs to be carrying 80% of all 
trips made in the city as against 40% at present. A big ask!
At the same time there is now a remarkable consensus 
among economists that road pricing is the only way 
in which congestion problems can be resolved. It is 
seen as a sensible way of dealing with the problem of a 
scarce resource, road space, which is ineff iciently used 
and, as a consequence, generates substantial costs to 
the community. Road pricing, whereby there is a direct 
charge to use congested roads, is a fair and logical 
outcome to what is a classic example of market failure.
For many years the Singapore government has imposed 
high customs duties on imported cars and set stiff
registration fees and high annual road taxes. In addition 
it requires anybody buying a new car to get a permit, 
currently priced at between S$27,000 and S$49,000, well 
above the average annual income per head. If this were 
not enough, for the past 30 years, to enter a restricted 
city zone, drivers must pay a $2 flat rate charge in the 
morning peak period, falling to $1.30 at off -peak times. 
When the peak charge was extended to the rush hour in 
1989, it further reduced traff ic.
From spring 1998, a new automatic ‘pay-as-you-go’ system 
replaced the above rather crude system. Using the latest 
microchip technology, charging is automatic (smart cards 
can be pre-loaded up to S$150) and is based on the actual 
contribution to congestion made by individual car users. 
The system is now well established. To the economist it is in 
many respects a ‘dream ticket’ – it matches in full the well-
known ‘polluter pays’ principle so strenuously advocated in 
textbooks yet so very rarely applied in practice.
But will it work in Delhi? This is highly problematic, not 
least because, unlike Singapore, Delhi does not currently 
have a world-class public transport system to provide a 
realistic alternative for urban travellers. There are many 
other issues as well.
Source: 
Adapted from
 India Today
, 23 July 2012.
Read the feature below and then answer the questions that follow.