Author : Arush Mehra

Expert Speak Young Voices
Published on Aug 20, 2018
Autorickshaw fare hikes: Either bring in accountability or privatise the industry

Auto rickshaw fares in New Delhi are likely to experience a hike following the recent approval of a new fare slab stricture by Delhi Chief Minister Arvind Kejriwal. As per the new fare structure, auto-rickshaw drivers will now be able to charge Rs 25 for the first kilometer (km), followed by Rs 10 of each subsequent km. At present, the auto fare is Rs 25 for the first two km and Rs 8 for every subsequent km. The price of a 10 km journey now will be Rs 115 compared to Rs 89, up 29.2 per cent.

This seems more like a political move than an economic one, as this new fare structure will not provide any economic benefits ­­­­– neither to consumers nor to drivers. The government is trying to appease auto-rickshaw drivers by putting on paper a policy that sounds like it could benefit them. And as far as consumers go, no price rise has helped them ever.

This is for two reasons. First, barring rare cases, auto-rickshaw drivers in Delhi do not ply by the government-regulated metre system. A January 2018 study conducted by Simon E. Harding et al. titled Auto-rickshaws in Indian Cities: Public Perceptions and Operational Realities found that the illegal process of overcharging – refusing to switch on the metre or tampering it, and bargaining with the passenger to fix a price – is widespread. Hence, an increase in official fares would only result in a proportional increase in such arbitrary fares charged by auto-rickshaw drivers.

Expert opinions are in line with such ideas. “People now opt for auto-rickshaws only for short distances or to travel to places where other modes such as metro or Ola/Uber (cabs) are not available,” Sanjay Gupta, head of the department, transport and planning, at the School of Planning and Architecture told The Indian Express. “The government should do a fare elasticity demand study for deciding the rates. And if rates are increased, then it should ensure drivers do not refuse any passenger and that they all go by the metre.”

Even the politics of fare upgrade is divided. “Any increase in fare in the present circumstances will benefit neither the drivers nor the public. The government should give adequate subsidy to auto drivers in the purchase of CNG and auto-rickshaws rather than increased auto fares,” leader of opposition in the Delhi Assembly, Vijender Gupta told news wire Press Trust of India.

Moreover, if we look at the fare increases in the previous years, we find evidence of policy failure. The fare hike of 2010 led to similar results: overcharging remained prevalent, and it was the daily commuter who had to face major inconvenience.

Though the government has tried to tackle the overcharging policy, their methods for doing so have been inadequate.

In 2012, the Congress-led Delhi government proposed that all new auto-rickshaws in New Delhi should come fitted with GPS systems. The intent of Delhi’s Department of Transport was to monitor all journeys made by the city’s auto-rickshaws from a central control room.

According to a November 2016 study by Simon E. Harding et al., the policy was not thought through – no pilot studies were carried out and there was no mechanism to detect, pursue and prosecute offending drivers. The authors also felt that this seemingly perfect solution would, counter-intuitively, lead to greater problems.

“While the GPS policy is intended to prevent overcharging by forcing drivers to run by the meter,” the paper asserted, “it might actually increase the likelihood of it occurring, by increasing the incentive to overcharge by placing an extra financial burden on drivers. If the policy makers had regarded low incomes as the cause of overcharging, they would not have designed a policy that further decreases income and increases the incentive to overcharge.”

Lesson: the government needs to conduct sufficient research and involve affected parties (in this case commuters, drivers and urban planners) to ensure these processes be carried out at every step – before, during, and even after implementation. Constant introduction of new policies and no supervision would only result in political chaos, economic loss.

What’s the way out?

Deregulation of the commercial vehicle industry would help – an ‘Uberisation’ of auto-rickshaws, so to speak. “The fares fixed by the government routinely go out of sync with fuel prices and the level of inflation in the economy,” writes P.J. Secki, in A Note on Autorickshaw Fare Regulation in India. By allowing companies such as Uber or Ola to reorganise autorickshaws, the government could catalyse what markets have done with cabs.

Under normal circumstances, markets deliver efficiencies. The government could deregulate the auto-rickshaw industry and let auto-rickshaws compete with cabs. If such a system tries to exploit the consumers, it would face massive backlash from consumers and be forced to bring down prices.

If companies persist in exploiting consumers (as auto drivers do with impunity today) and lead to a market failure, the government could keep an intervention clause handy.

The first steps in this direction are visible. In April 2018, the government did away with the requirement of a commercial licence for driving taxis, three wheelers, e-rickshaws and two-wheelers (for food delivery), allowing drivers to use their private licences. In the process, it has cleared a bureaucratic layer, and expanded the market.

It is crucial that Delhi gets its auto pricing policy right, as the model could be replicated in other cities of India. With failed yet repeated political handouts to auto unions on one side and a market disrupting technology led by Uber on the other, consumers are clearly choosing the latter.

The time for fare hikes without the accompanying accountability of metre-driven vehicles are over. Consumers have shifted. Now, the government needs to move with the times.

The author is a Research Intern at Observer Research Foundation, Delhi

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Arush Mehra

Arush Mehra

Arush Mehra is a research intern at Observer Research Foundation, Delhi. ...

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