What is Congestion Tax - Meaning, Charges, Rules, Example

As a step to reduce the ever-increasing traffic jams in Bangalore, the Karnataka government is planning to introduce a congestion tax. It was declared in the recent ‘Karnataka's Decade - Roadmap to $1 Trillion Economy’ report and will be imposed on vehicles travelling through certain major roadways during peak traffic hours. Continue reading this blog to find out more. 

What Is Congestion Tax?

Congestion tax is a fee levied on vehicles that enter specific regions of a city during peak traffic hours. It is an effective way to reduce traffic congestion and air pollution, along with encouraging people to opt for public transport. 

This system is already in effect in major cities around the world, such as London, Stockholm, Singapore, New York, and several other regions in the European Union. Now, it is proposed to be introduced in Bangalore to curb the city’s increasing traffic congestion. 

Concept of Congestion Tax in India

In India, the Karnataka Government has proposed to introduce a congestion tax on vehicles entering any 9 of the 11 specific roads in Bangalore during peak traffic hours. They may include the following:

• Outer Ring Road
• Old Airport Road
• Sarjapur Road
• Old Madras Road
• Hosur Road
• Bannerghatta Road
• Ballari Road
• Kanakapura Road
• Magadi Road 
• Tumakuru Road
• West of Chord Road 

This tax will be collected using the city’s FASTag system. Toll booths with cameras will be installed at specific entry points on the aforementioned roads. The cameras will capture images of the cars and the congestion fee will be deducted from the vehicle owners’ bank accounts.   

Growing Traffic Congestion Challenges in India

Over the years, India has become one of the world's fastest-growing economies. However, its traffic congestion issues have also grown in tandem. This is a result of a rising population, increasing personal income, decreasing the price of cars, and poor urban planning. 

Traffic congestion is a major issue in India’s metropolitan cities. For instance, as per a TomTom Traffic Index survey, travelling 10 km in Bangalore can take up to 28 minutes. However, covering the same distance in Dubai will take less than 13 minutes. 

Additionally, traffic congestion increases fuel consumption and vehicular emissions, contributes to climate change, reduces productivity, and grows business costs. As per a Boston Consulting Group study, by 2030, India’s traffic congestion issues can cost up to USD 37 billion. 

Thus, to counter all these issues, implementing a congestion tax can be really beneficial.  

Benefits of Congestion Tax Implementation

According to Bangalore Metropolitan Transport Corporation (BMTC) officials, implementing a congestion charge can have the following benefits:

• Encourage Public Transportation Usage

At present, Bangalore’s public transportation system operates at 48% capacity. Initiating the congestion tax policy will encourage citizens to reduce the usage of their private vehicles and opt for public transportation options. 

This will significantly reduce traffic jams in major roadways, along with increasing the government’s revenue from its public transportation system.  

• Benefit the City’s Economy 

Lesser vehicles on the road will facilitate faster commutes for citizens. It will also ensure increased productivity, lower business costs and reduce fuel expenses. Moreover, it will drastically reduce air pollution, enabling people to lead healthier lives. 

Also, implementing a congestion tax will make driving private vehicles more expensive. Thus, people will automatically turn to public transport, providing the government with increasing revenue to develop its transportation system.   

Challenges and Considerations for Congestion Tax in India

Here are some of the challenges which the congestion tax system can face:

• Another tax burden will be increased for citizens. 
• This strategy might not be effective on higher income groups who can easily afford to pay for a car and its fuel expenses. 
• Lobbying and political opposition from the private car industry.
• Most roads in the Bangalore Urban District area are short and non-continuous.
• People can opt for arterial roads just to avoid areas with congestion tax.  
• Traffic congestion in Bangalore often occurs due to ongoing civic works like metro rail construction, building flyovers, etc., making this tax unfair for citizens.   

Example of Congestion Tax

Let’s take the example of London to understand how the congestion tax system may affect traffic conditions. 

A congestion tax of £5 was introduced in London in 2003. After this, traffic congestion in the Central London area decreased by approximately 20%. Currently, there is a revision in the congestion charge which is currently £15. 

Thus, people mainly use public transportation when commuting to Central London. Only taxi chauffeurs, delivery agents, traders, plumbers and other service providers use private vehicles in this area and pay the congestion tax. 

Congestion Tax in Bangalore

Therefore, congestion tax can be a game-changer in reducing the traffic jams which Bangalore is famous for. This is just in the planning stage at the moment; hence, to implement this system in real life, the parliament needs to make comprehensive laws, conduct public consultations, and develop the required infrastructure.