Time to Corporatise Autorickshaws in India?

A massive spurt in vehicular traffic in Indian cities in the last decade has brought into focus the need to overhaul and expand public transport. The Government of India has tried to incentivise states to invest in public transport through central schemes like Jawaharlal Nehru National Urban Renewal Mission (JN-NURM).

However, present Government schemes have focused primarily on mass forms of public transport such as buses, metro rail, etc. Other forms of public transport such as taxis and auto rickshaws, which provide a more “personalised” service to passengers, have been ignored so far.

The importance of autos and taxis

What differentiates auto rickshaws and taxis from buses and metro trains, and indeed makes them more important, is that they offer an end-to-end service as a single mode of transport from origin to destination, as well as the all-important last-mile connectivity to the commuter’s doorstep.

The success of any form of mass public transport, however well designed, ultimately rests on the quality of last-mile connectivity. If getting to the bus stop or metro station remains a hassle, people will continue to use their cars and bikes, and investments in public transport will not yield the desired results.

Even for those unable or unwilling to travel by buses and metro trains, a hassle-free experience of travelling by autos can at least ensure that they refrain from using their personal vehicles for every day commutes.

Both these benefits combined can bring significant improvements to the traffic situation in major Indian metros. And for this reason, I would rate autos and taxis as much more important than buses and metro rail.

Which begs the question: why have authorities completely neglected this aspect of public transport so far?

I live in Bangalore. Auto drivers here are infamous for grossly overcharging, refusing to ply and being rude in general, and occasionally abusive as well. And the scenario is pretty much the same in most Indian metros, be it Mumbai, Delhi or Chennai.

Honestly, I am not sure if auto drivers overcharge in order to make more money for themselves, or whether they are forced to do so to recover the cost of hiring the autos from their unscrupulous owners, many of whom are, or have contacts to, powerful people in the establishment.

And therein lies the answer to the above question: authorities are not interested in fixing the problem because powerful people stand to benefit from it, and because there is no serious political impact of not fixing it.

This brings us to the moot question: is it time to corporatise autos and taxis in India?

Autorickshawbot

The case for corporatising autos

There is already limited corporatisation in case of taxis in select Indian cities. For example, Meru Cabs and Easy Cabs run taxis in Bangalore, Mumbai and a few other cities. Apart from these, there are various lesser known local entities which operate taxis in the respective cities.

And while their fares are indeed higher than the Government-approved taxi fares, anyone who has travelled by these taxis can vouch for the fact that there is far greater transparency in terms of a clear fare structure and assured service, resulting in a hassle-free travelling experience.

But ultimately, taxis will always remain less popular than rickshaws in India due to higher fares, and therefore it is necessary to extend the taxi system to autos to have a visible impact on the ground situation.

Corporatising autos will have several immediate benefits, as outlined below:



1. Benefits for passengers:

a. Less supply-demand constraints: Today, the number of autos plying in most major cities is well below the actual demand. Efforts by the state Governments to issue more licenses meet with political opposition, usually from auto rickshaw unions themselves, for fear of the extra competition affecting their income.

In a liberalised world, the number of autos in service would be decided solely by the prevailing demand-supply ratio, and entities operating auto services would be free to adjust the size of their fleets in line with the requirements, similar to how bus, train and flight services are run today.

b. Transparency in fares: When a corporate entity runs an auto service, there is a transparent fare structure that is widely advertised and thus well-known. People are therefore more aware of what they need to pay. And competition ensures that operators stick to the official fare and desist from cartelisation.

By contrast, when it comes to autos today, the official fare structure fixed by the government remains only on paper, because the auto drivers demand much higher fares and refuse to ply if you don’t pay up.

c. Transparency of ownership: By allowing corporate entities to run auto services, the ownership structure can be made more transparent. Today, there is no branding of any sort, and so no one knows who actually owns a particular auto rickshaw. As a result, the public anger is not directed at any one entity or brand, which makes it easier for the authorities to do nothing.

If the ownership was well-defined and known, then people and the media could agitate in a more focused manner, which would then compel the authorities to take action.

d. Accountability to customers: Any corporate entity’s future depends on its acceptability with the general public, especially when there is competition. Thus, corporate entities are accountable to their customers, and have to focus on maintaining their reputation. For this reason, it’s much more unlikely that rickshaws operated by corporate entities would indulge in malpractices, because then their brand image would suffer in the long run.

d. Technology-driven experience: Corporatisation and liberalisation often paves the way for induction of more technology to reduce operating costs and ensure better service. Unlike individual operators, corporates would have the resources to invest in technology to offer a superior experience to customers. This could be in the form of websites and call centers for bookings, tamper-proof meters, additional payment options, on-board entertainment and so on. Individual operators could not possibly think of offering these kind of facilities or services to customers.

2. Benefits for auto drivers:

a. Assured income and benefits: As mentioned earlier, an auto driver employed with a corporate entity would get a salary which would likely have a fixed component as well as a variable component (based on his earnings). Not only this, he would also be eligible for other benefits such as pension and provident fund, medical benefits, various allowances, leaves, etc. This would also go a long way in meeting the Government’s agenda of bringing more people under the social and medical security net.

b. No credit hassles: Since the auto drivers would be employees and not debtors, they would be free of any worries of repayments, etc. and would not be under the grasp of unscrupulous owners or money lenders.

3. Benefits for the Government:

a. Freedom from regulating fares: Every now and then, auto and taxi drivers go on strike to demand a hike in the fare structure. This puts an unnecessary burden on the local Government and also inconveniences passengers. With corporatisation, the companies running the rickshaws would be free to decide their own fares, and the Government could play the role of a regulator to ensure that there is no cartelisation and fair play is observed.

b. Higher tax income: If corporates were to run rickshaws, they would pay taxes on their profits to the Government. Also, since the salaries of the rickshaw drivers would also be known (unlike what it is currently), they would also potentially be eligible for paying income tax. Contrast this to today, where it’s impossible to track exactly how much an auto driver or owner earns, and thus difficult to tax.



c. Widened social and medical security net: As explained above, rickshaw drivers would be eligible for social security and medical benefits, in line with other salaried professions. This would meet the Government’s social agenda of widening the social and medical security net.

As can been seen, the potential benefits are immense and widespread, and far outweigh any concerns anyone may have regarding corporatisation in general. I genuinely feel the time has come to relook at antique Government policies with regard to autos, and free them from the inefficiencies of state control.

Your thoughts and comments please…

P.S. For those hassled by auto-rickshaws, you may refer to this blog post for what to do. You can also visit the Bangalore Traffic Police website and complain there directly.


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2 Comments

  1. Abhinav MathurAbhinav Mathur02-29-2012

    I think that this solution of corporatizing richshaws might be a “from the frying pan into the fire” issue. In case of taxi operators like Meru,Easy cabs etc , they are trying to compete against each other as an organisation hence regulating the fares. It is like a self-regulating scheme of things. The supply of Taxi’s far outnumbers the demand. So each operator is undercutting each other to retain profitability. In case of autorichshaws, they are not competing against each other, they are competing against us, the public. They fully know that the demand for rickshaws is far greater than supply which is why the common public continues to pay double fare or any demanded fare. Basically the public is at the mercy of the rickshaws due to the lack of a better alternative. Auto’s are the double edged swords that we all have to yield. Here is what will happen in case they are corporatised.

    1. Instead of prices getting reduced or getting regulated, they will spiral upwards, simply because they can. Since there is no alternative, the public has to comply. We will be held at ransom and mercy of the organizations. It is like the increase of petrol prices. No matter what the price is , people will still pay for it because they still need to go from point A to point B.

    2. Even with the current scenario of pre-fixed rates, the drivers don’t comply. Even when given a rate card from an organization, they will continue to not ply with the meter rates. This is because of the large numbers of auto’s involved. Since these rickshaws are not call based or pre-booked, there is no way of tracking or associating an auto to a customer or provide personalised service. There are simply too many autos. I feel the taxi model does not scale up to the volume of the autos.

    3. Playing a devil’s advocate here – why would a driver associate himself with an organization and live on a salary when he can own an auto and be his own king. This is due to affordability. The cost of owning a car is far greater than an auto. That’s why only big taxi operators can afford to own and operate so many cars. In auto’s lots of drivers own their vehicles and don’t want to be bound by an organization.

    Just my 2 cents!

    • Vijay PadiyarVijay Padiyar02-29-2012

      Hi Abhinav

      Thanks for reading the blog post and posting your thoughts 🙂

      Today there are many reasons why autos overcharge:

      1. More demand than supply – You have rightly pointed this out. This is because supply is kept artificially low by Govt. Autos need Govt. license to run, and Govt. has not increased number of licenses recently, mainly due to opposition from auto unions themselves who don’t want more competition.

      2. Autos are owned and operated by different people – The drivers rent autos from real owners (mostly babus, politicians, etc.) at high rates and so fleece commuters to recover this cost.

      The following is how corporatisation will address these issues:

      1. Demand-supply: By deregulating auto licenses completely, there will be no Govt. caps on number of autos. So the number of autos on road will be decided on its own according to demand-supply equation. Also, anyone will be able to run a fleet of autos, just as today there are dozens of taxi services. Over a period of time, there should hopefully be adequate number of autos such that people are not fleeced.

      2. Ownership: Today, if a taxi company provides poor service, we can complain and ruin their reputation because there is a brand involved. So ther is an incentive for the company to safeguard their brand by providing decent service. In case of autos, there is no brand (e.g. Easy Cabs) and we cannot post specific feedback in case of bad service. So autos get away with it. With proper ownership as in case of taxis, service will improve as companies will have to safeguard their brand reputation.

      Regards

      Vijay

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