🚍 Free Travel for Everyone: A Case Study
Here's a look into why a wealthy country is giving out freebies and how successful it is.
Take a minute and imagine that you live in a country which has one of the lowest diesel and natural gas prices.
If you are a vehicle-owner, this thought probably made you smile more than thinking about your crush.
But what if we told you that cheap diesel and gas only cause more problems.
Don't believe us? Ask Luxembourg.
🤔 The Luxembourg Problem Statement
The European city of Luxembourg seems to have it all: picturesque landscape, economic stability, and most importantly the cheapest diesel and gas rates in the EU.
It has one of the highest per capita income in the world and 696 cars per 1,000 people.
Basically, everything Indian parents want their kids to have (minus an MBBS or engineering degree).
So, what's Luxembourg's problem then?
You see, too much of a good thing is also bad.
Thanks to Luxembourg's numerous cars the country is facing insane traffic.
Yes, it is one of the world's 53rd most congested cities despite having a tiny population of 640,000 people (Fun fact: Even Goa has more people than Luxembourg).
People lose 163 hours to traffic every year in the country.
The cheap diesel and the high standard of living meant that most houses bought cars and not just one, as many as they could.
So, now life in Luxembourg is about spending time in traffic and finding a parking space.
This car pandemic in Luxembourg is also bad for the environment.
So, Luxembourg came up with a genius idea.
💡 The Solution
Let's make public transport free.
This would not only have a great socio-economic impact (by making it possible for both the rich and the poor to travel as they please) but also highlight that fixing climate change can also bring perks for the public and not only sacrifices.
Sounds great?
Sounds expensive, actually!
The cost of this genius idea would be $43.4 million in lost revenue each year.
But Luxembourg ki government is dildaar (generous). It felt that it was earning enough money through taxes and now just wanted to make life and the environment better for its citizens.
So, all public transport (except first class tickets on trains) is now free. It is the first country to achieve this.
Did this solve the problem? Did all the cars magically disappear from the roads?
Of course not. Public transport, even if it is great and well-managed public transport, doesn't compare with the comfort and luxury that cars give you.
You would rather be stuck in traffic in your Maserati (showrooms of which are extremely common in Luxembourg) than miss a bus and be late. Or worse be stuck in a crowded bus or tram that may take longer to take you to your destination.
Which is why even though some citizens are saving €500/year on transportation thanks to the new law, cars are still set to increase by 6% in the country by 2035.
So, what could be a better solution?
🚀 The Better Solution
The better solution for the problem would be to make driving more expensive.
Yes, it is not enough to just incentivise good behaviour. It is important to disincentivise the bad too.
And Luxembourg is taking a step towards this.
While other EU countries have now increased rate cuts on fuel taxes amid rising prices, Luxembourg has kept cuts low to keep diesel expensive.
But the country still won't be able to fix its car problem.
Because its car problem is actually a house problem.
Huh?
Luxembourg has an acute shortage of affordable housing. Renters often pay upto 40% of their salaries as rent.
But it has also developed as a hub for fintech countries.
So, a lot of people are now buying houses outside Luxembourg in other countries and commuting to work every day. For these people the free public transit doesn't make a difference.
Thus, to solve its car problem, the country needs to fix the housing problem by reducing the price of properties and giving rent subsidies.
🤷♀️ So, Is Free Transport Bad?
Well, no.
Luxembourg's case is an anomaly because free transport has usually worked out in favour of cities that have introduced it.
In fact, it could be a great way for cities to end both traffic and pollution. Especially in developing countries that do not have the capacity for quick EV adoption.
And India has some great contenders for this program.
For instance, Mumbai, Bengaluru, and Delhi.
All three cities rank in the top 10 most congested cities in the world!
Delhi has already introduced free bus services for women, a step towards the free public transit system.
It also aims to make this available for senior citizens and kids.
But the problem is, Delhi is not Luxembourg.
Though it did see an increase in more women riders taking the bus now (a 15% rise), the move weighed heavily on the Delhi Transport Corporation's pockets.
The agency is currently witnessing losses of more than Rs. 1,800 crores.
Plus, it doesn't even have enough buses to support the number of people who need the mode of transportation.
But this policy would be of major help to Delhi not just because of its insane pollution but also because 34% of Delhiites cannot even afford the minimum bus fare right now.
So, our problem statement is figuring out how to get to a point where we have enough tax revenues that we can make transportation free because Indians really need it.
This could help more Indians get an education, get better job opportunities or help budding entrepreneurs spread their business and grow.
But the question is will we be able to achieve this lofty goal any time soon?
Only time will tell.
⚡In a line: Luxembourg tried to solve its traffic and pollution problem by giving people free public transport opportunities but turns out it was solving the wrong problems.
💡Quick question: Do you think India will ever be in a position to give its citizens such perks?
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Great article! One point though - I'm not sure if this will work in a country like India, where public transport quality is quite poor. Except metros, the other modes of transport in all 3 cities are not up to the mark, and even if made free, probably won't be used by people who own cars or travel by Uber :)