Calcutta Notebook


Residents of almost every large city are losing their health due to the failure of the Government in controlling air pollution. Its control is beneficial for all sections of the society. The cost of running a heavily polluting diesel car is Rs 5 per kilometer while that of running a clean electric car is Rs 8 per kilometer. The car owner will incur an additional cost of Rs 3 per kilometer if he switches from diesel to electric car. Assume further that a diesel car owner runs his vehicle 100 kilometers per day. In consequence he saves Rs 300 per day by using diesel car. Assume there are 100 diesel cars in the town. The total gain to the car owners is Rs 30,000 per day. Now let us calculate the cost incurred by people of the town due to this pollution. Say a family incurs an additional cost of Re 1 per day in doctor fees and medicines due to the increase in respiratory and other disease due to the pollution. The total cost incurred by the one lakh families in the town is Rs 1 lakh per day. It is clear that the car owners will incur a loss of Rs 30,000 while the residents of the town will gain Rs 1 lakh if the government forces the rich to use electric cars. The society will gain Rs 70,000 per day. Control of air pollution is, therefore, beneficial for the society. However, there is resistance from the rich who will have to incur this additional burden. The government does not do this because it involves the imposition of a cost on the rich.

It is not necessary for this cost to be forced upon the rich though. They could be compensated from the savings made by the people. Residents of the town would be willing to pay 30 paise per day to get clean air. This money of Rs 30,000 per day can be given to the car owners. The car owners would be willing to switch from diesel to electric cars if they are given this money. Such an arrangement would be beneficial for all sections of the society. The car owners will be happy because they will not incur any additional cost due to the use of electric cars. The residents will be happy because they will save health costs of Re 1 per day while they will pay 30 paise per day. This arrangement is still not implemented because the government does not want to take upon itself the burden of collecting 30 paise per day from the one lakh families. The society will have to employ an army of tax collectors to collect 30 paise per day from one lakh families. The cost of collecting 30 paise per day would be prohibitive. As a result the society is not able to implement such a system that is beneficial for the whole society.

This cost can, however, be built into the other taxes already being collected. There will be no need to incur additional cost for collecting this amount then. Say, the Government imposes an "air pollution cess" on property taxes or service tax and collects this additional Rs 30,000 per day along with other taxes. In that case, the society will not incur any additional cost in collecting the health tax of 30 paise per family. The money collected can be paid to diesel car owners. But the Government does not take interest in implementing such measures because these lead to the imposition of higher taxes on the rich.

Such a measure deprives them of profits. Let us look at air pollution from a factory from the lenses of a factory owner. He will get subsidy from the government for installing pollution control equipment. He will spend this money in installing the equipment. There will be no net gain for him. On the other hand, he will gain by spreading pollution. He will save crores of rupees by not installing pollution control equipment. He will incur a relatively small cost towards establishing an air purification system in his house and office. Thus the rich prefer that pollution not be controlled because it is more profitable for them. And the Government does not implement measures to control pollution because it is driven by the interests of the rich.

In the result pollution is not controlled because of failure of governance. The government, however, provides other public goods that are similarly placed. These include law and order, justice, currency, and defense. Reason is that the rich can obtain these public goods at a very high cost. They would have to employ an army of personal bodyguards to protect them, their family and their managers if the government did not provide law and order. They would have to undertake transactions by carrying gold coins if the government did not provide a universally acceptable currency. Thus there is a huge pressure from the rich on the government to provide such public goods. Conclusion is that the government provides only those public goods like law and order and currency that the rich cannot obtain in their individual capacity. It does not provide other public goods like clean air and water that the rich can obtain in their individual capacity at a relatively less cost.

This analysis is confirmed by the compulsory use of CNG by public transport like auto rickshaws, taxis and buses. There is no loss of profit for the rich in implementing this. The cost of CNG is borne by the people. The benefits of CNG are also borne by the people. The rich stand on the sidelines, so to say. Therefore, they did not oppose the implementation of CNG.

It is a solemn responsibility of the government to collect taxes and provide clean air to the people. This is a win situation for the people and a "no loss" situation for the rich. The rich are not satisfied with this "no loss" arrangement. They want profits from pollution. Time has come for the people to put pressure on the government to provide public goods like clean air and clean water and save the people from incurring huge costs.

Vol. 49, No.31, Feb 5 - 11, 2017