Tolls and taxes keep India from the fast lane

At the border checkpoint, Prakash pulls his truck over to the side of the road, and jumps out to make photocopies of all his documentation – two copies each of his driver's license, his vehicle registration, and a list of the taxable goods on his truck, which consists of one massive hunk of rolled steel.

This isn't an international border. Prakash is just crossing from one Indian state to another, from Haryana to Rajasthan, and he's going to pass through two more state borders before he reaches Bombay two days from now.

"This is a big problem for drivers," complains Prakash, as he pays for photocopies at a small push-cart stall run by car battery. "This checkpoint usually takes about one and a half hours. Others take three hours or more, because of the long lines."

He wipes his forehead, and looks at his watch. "You have to pay toll fees, taxes to the state. Sometimes, if the police want a bribe, you pay that, too."

On paper, India is an economic power, with vast natural resources and a massive population of talented workers. In reality, India remains a collection of 28 separate states and seven union territories, each with its own rules and regulations, its own tax code, and in many cases, its own separate language and cultural customs. To solve this problem, India may need a free-trade agreement with itself.

"We are one country, so we ought to be one market, but we're not," says Cyrus Guzder, a transportation specialist at the Confederation of Indian Industries, a business lobby group in New Delhi. "We are 28 different countries. We don't have a unified tax system, we don't have a unified transport system, and this hurts the ability of Indian business to grow."

In many respects, the European Union is a more coherent polity. "India is more complex, larger, and more diverse than all of the European nations put together," says Rajiv Kumar, director of the Indian Council for Research on International Economic Relations in New Delhi.

"Fifty percent of the cost of any product is freight charges, so it's a huge cost," says Mr. Kumar. "So if you remove that cost, for the first time, the advantages of the size of the Indian economy will come through."

India's phenomenal growth since the economic reforms of 1991 is best seen in the millions of trucks that ply the Indian highway system, carrying agricultural produce to cities, cloth to textile mills, and raw materials to the 129,000 factories spread across the country.

Valued at $20 billion, the transport sector dwarfs the Indian telecom industry, which gets much more notice both at home and abroad. But making transportation more efficient will not be easy. Ninety-five percent of India's trucks belong to small-time operators, with just one or two trucks per owner, a phenomenon that keeps most truckers thinking only for themselves, rather than of their common interest in reducing regulations and taxation.

One of the larger operators on India's highways is SafeExpress, an express delivery company.

"We can be competitive with the best companies in the world, when it comes to speed," says company chief, Amar Bhalla.

To get a package from New York to Colorado by road takes four days, he says, and SafeExpress makes the route from Delhi in the north to the southern city of Thiruvananthapuram in four days. "The difference here is that, while the distance is about the same, we pay six different taxes, stop at 28 different checkposts to pay dues, and we fill out documents in eight different languages." In an industry where time is money, all those stops cut into profit margins.

In the past year, some Indian states have abolished their border taxes and put in place a value-added tax on every purchase of manufactured consumer goods in stores, everything from electronics to potato chips. Most states have adopted the VAT, but only two have stripped away the other redundant taxes.

Anurag Mehra, an analyst at Positron Avis Services in New Delhi, says that changing the tax system is only one way to cut the cost of transportation.

Another way is to computerize border checkpoints, and to give truckers smart cards that carry all their data. Signals from these smart cards could be accessed by truck owners to know how far the truck is from its destination. And government authorities could automatically withdraw the appropriate toll or tariff without forcing the truck to stop.

"India is seeing exponential growth, so we should be seeing amazing change in the transport industry," says Mr. Mehra. "But unfortunately, in the real world, whatever was true 50 years ago is the same today."

Near the border checkpoints for Rajasthan state, a trucker named Jamshed Khan stops to take a bath at a water pump outside a restaurant.

With chattering teeth, as the water evaporates in the dry desert air, he counts the tolls and taxes he will have to pay on his three-day journey from New Delhi to Surat in the western state of Gujarat. He'll pass through four checkpoints over the 750-mile journey, paying 1,000 rupees ($22) at each post, spending an hour or more at each stop.

"It's a big hassle," he says with a grin. "I'm just taking raw cloth to Surat, and then I bring a truck full of finished clothes back to Delhi."

Pooran Kirpal Singh is taking Coca-Cola products from a plant in the north-central state of Uttar Pradesh down to the thirsty citizens of Jaipur in Rajasthan, paying 160 rupees ($3.45) in toll tax at the Shahjahanpur checkpoint, plus hundreds more in excise tax. All of these costs are paid by the truck's owner, he says, but if a corrupt tax authority at one of the checkpoints demands a bribe to allow an overloaded truck to pass, Mr. Singh has to pay that amount out of pocket.

"I've been working 15 years in this same job, and the waits have gotten longer and longer," Singh says. "Now that business is getting better, there are more trucks on the road, but that just means a longer wait at every state checkpoint."

But in true Indian entrepreneurial spirit, Singh's pain is another businessman's opportunity. At the Shahjahanpur checkpoint, there is a shop selling freshly boiled milky tea; another selling cold sodas; another selling chips and snacks; another offering telephone facilities for truckers to call home; and even a shop offering legal services.

Thirteen-year-old Sol Singh runs a photocopy machine off a car battery, with only a piece of tin sheet serving as shade. On a good day, he makes about 100 rupees, charging a rupee per page.

A giant truck, painted with bright flowers and stacked high with bales of cotton, stops in front of young Singh's photocopy machine, and a driver hops down with a handful of papers to copy.

"This is a good day," grins Singh.