Tata’s one lakh car – Politics, pollution and congestion

Tata’s small car project has raised concerns among the environmentalists, as they fear about the impact of a sudden surge in the number of cars on Indian roads, given its price of just Rs. 1 lakh.

Responding to this concern, Ravi Kant, the managing director of Tata Motors, in his interview to the business world says,
“Are we saying that people should not have cars? Or are we saying that people should not possess small cars? Let’s be quite clear on this because if you say the latter, there is a bias and we are not being fair. Either we should say nobody should own cars or there should be options available to the customer.”

On the problem of congestion, Neelakantan in his blog interim thoughts says,
“Who is to say that a Tata small car will congest the roads and not those SUVs which are as big as an average Mumbai home do not?”

Well, both of them argue that, if the rich has the rights to pollute and congest the roads, why deny the same to not so rich ones. That reminds me of Tim Harford’s strong statements against such line of thinking in his book The Undercover Economist.

“It is true that the rich can afford to drive more than the poor, but it is just as true that the rich can afford to eat more than the poor. This is unfair too, but if you accept the workings of the price system for typical goods like food, why not road space or clean air? We recognise that food, clothes and houses cannot be free or we would quickly run out of them. It is because roads are free that we have run out of spare road space.”

So what’s your say on Harford’s thoughts?

For Tata’s fighting against the politicians seems to be the order of day now. First during the TN state elections in 2006, it was alleged that Maran brothers misused their power and try to get stakes in the Tata Sky Direct to Home (DTH) project. Then there is controversy over the acquisition of agricultural land in Singur for the Tata’s 1 lakh car project. Now within one month of signing the MOU with Tamil Nadu Government to set up Rs. 2,500 crore Titanium dioxide manufacturing plant in Tuticorin district, the project was put on hold due to the opposition from various political parties, starting from Amma’s ADMK to Vijaykanth’s DMDK to the yet to be launched Sarath Kumar’s new political party.

So I won’t be surprised if some enterprising minister proposes new kind of tax, called congestion tax to the Tata’s dream car when it hits the final stage of production. Its high time Tatas learn few tricks to do business with Indian politicians.


  1. Neelakantan says:

    Tim talks of a system like an access charge – which wld be higher for bigger vehicles and lower for smaller vehicles – or a petrol/diesel cess, again depending on the vehicle or a road tax (which is prohibitively high). So, whatever congestion tax has to be levied all across – it cannot be model specific. And, as of now, there is no congestion charge on any vehicle in any city in India. Strange but true.

  2. Siva Rajendran says:

    Thanks for your comments, Neelakantan.

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