Autonomics- The Economics behind Autorickshaw, The Hindu

AUTONOMICS

Based on a series in The Hindu Newspaper dated November 15, 2014

  • Chennai's auto woes may not be a simple pricing problem, but a system problem.
    PTI

    Chennai’s auto woes may not be a simple pricing problem, but a system problem.

What is the economics behind the autorickshaw trade in Chennai? Who gains, who loses? To find out, we followed one driver – from the day he went to buy an autorickshaw and waited outside the RTO to obtain the relevant paperwork, to the first week on the road. Based on his experience and interviews with half a dozen other drivers, here’s what we found:

1) Is it viable to use the meter?

Yes. After repeated intervention by the courts, Chennai currently has one of the fairest autorickshaw fare slabs in the country. Over a rainy week, when income takes a dip due to bad road conditions, a meter-using driver still made around Rs. 5,000.

An autorickshaw driver in Chennai, after accounting for all expenses, takes home anywhere between Rs. 10,000 and Rs. 15,000 a month. Despite this, barely a year after the new fare structure came into effect, autorickshaw drivers are once again flouting the meter norm.

One critical reason for this could be the additional costs the system imposes on autorickshaw drivers, even before the vehicle hits the road. Autos are inexplicably more expensive than they should be. Drivers pay more than the official rates for everything, from insurance to registration (at Kolathur RTO, there were 13 touts and papers were cleared only if their initials were inscribed on forms). The costs added up to an extra Rs. 1,500 in monthly loan repayments, which is nearly 10 percent of the take-home income

2) Why is it so hard to reform the autorickshaw business?

Cartels. Chennai’s auto woes may not be a simple pricing problem, but a system problem. A reasonable fare system would immediately work if there is a competitive, free market system in place. But Chennai’s autorickshaw market is far from being free.

There are cartels all along the chain – starting with dealers who manage to sell autos at prices higher than some cars. The three major auto dealers in Chennai sell the vehicles for around Rs. 1.71 lakh each, although receipts available with The Hindu show the price off the manufacturing floor is around Rs. 1 lakh.

“They obviously operate like a cartel,” says Aishwarya Raman of Auto Raja. “Even the look of the autos hasn’t drastically changed. There is no competition and nobody is contesting these prices,” she says. There is no competition on the streets either because auto unions and neighbourhood stands, again, act like cartels.

The only long term solution is government regulation which will allow the formation of companies and cooperatives. There is an existing model within the city itself that can be adopted, namely, the call taxi service. The per-km cost of a call taxi ride has fallen by nearly 20 per cent since 2004.

3) Can mobile applications show the way?

Perhaps not. Due to increasing competition from call taxi services, cities are witnessing a suite of solutions that intend to disrupt the auto market – from Delhi’s Pooch-O and Bangalore’s mGaadi, to Chennai’s own call-based services like Auto Raja and Namma Auto.

The experience of other cities shows the primary advantage of these services is increasing the average number of kilometres operated by an autorickshaw driver. Chennai’s current average of 98 km per auto, per day, is one of the lowest in the country. If autos don’t clock more kilometres on the road, drivers won’t make enough money.

However, solutions like Auto Raja may not make a major dent since they account for a mere 500 of the city’s 72,000-odd autorickshaws. The prevailing rules are preventing larger innovation because the State government has repeatedly focused on restriction, rather than regulation, says Madhu Sivaraman of the Centre for Public Policy Research.

The government currently decides who can drive an auto, how an auto should look and even, till 2010, how many autos should ply in the city. “It’s a failure of the system when taxis are able to compete with autos,” says Sivaraman

 

 Purchasing pains

 

What it should have cost:

Auto Rs. 99,900 + retailer’s profit Rs. 1.71 lakh

Permit Rs. 375 Rs. 375 [extra Rs. 1,000 to get it on the same day]

Insurance Rs. 5,080 Rs. 5,250

Registration, FC Rs. 1,850 Rs. 6,500

What it actually cost:

Rs. 1.71 lakh

Rs. 375 [extra Rs. 1,000 to get it on the same day]

Rs. 5,250

Rs. 6,500

Auto price, over the years

2009 – Rs. 1.35 lakh

2011 – Rs. 1.52 lakh

2014 – Rs. 1.71 lakh

No. of autos in city

2009: 44,973

2014: 72,294

Fairest of the fares

Chennai’s government-fixed auto fares would be the envy of autorickshaw drivers across the country.

Though drivers here constantly complain, the city’s fare structure is tilted more in favour of auto drivers than even cities like Mumbai and Delhi, where the cost of living is much higher.

“In a study we did earlier this year, we found the cost of operation of an autorickshaw is just Rs. 3.5 per km,” says Roshan Toshniwal of EMBARQ. “Chennai’s auto drivers have gotten used to fleecing because there was no fare reform for 14 years. It’s a culture issue now,” he says.

How much a 10-km auto ride will cost you

Delhi Rs. 89
Hyderabad Rs. 113
Mumbai Rs. 114
Pune Rs. 117
Chennai Rs. 124
Bengaluru Rs. 131

Source: EMBARQ

KAVITA KISHOREVIVEK NARAYANAN

By virtue of being the ones that brought in metered accountability to commute, call taxis continue to hold the edge over autorickshaws in Chennai.

Almost all major call taxis having progressed to coming out with having mobile applications for booking, and most drivers are familiar with GPS-enabled devices.

“Rather than standing for an hour trying to find an autorickshaw that uses the meter, I don’t mind paying a little more and taking a call taxi,” T. Akshith, a doctor, said.

A company, Callzila, is now attempting to bring the same culture to autorickshaw commute. “Currently, the main advantage of autorickshaw is the option of hailing them down at a moment’s notice,” Magesh Kumar, managing director of Callzila, said.

“Autorickshaws need a lot more organisation in the city. If it is possible to track an autorickshaw and its availability, it is possible for them to function as efficiently as call taxis,” he added.

Experts say that autorickshaws are an essential part of the city’s transport. “Chennai is a multi-nodal city, with many economic hubs and people need to travel between them,” Solomon Benjamin, professor of humanities and social sciences at IIT-Madras, said.

“Autorickshaws are crucial as they help reduce pollution, and also provide point-to-point transport. With small modifications like introduction of compressed natural gas, it is possible to reduce pollution and promote autorickshaws,” said Solomon Benjamin, professor of humanities and social sciences at IIT-Madras.

Madhu Sivaraman, director (projects), Centre for Public Policy Research, said some cab companies had conducted a survey and found most people prefer to travel short distances in call taxis. “Cab companies capitalised on this information and started to offer discounts for the first four km to capture business,” he said.

He added that the government should liberalise permit conditions for autorickshaws, or they would be wiped out in the competition. “They can also be permitted to travel long distances like the call taxis,” he said.

 

Autos at public places under scanner

 
Officials said there had been an increase in the number of autorickshaws seized in front of railway stations for overcharging — Photo: M. Srinath
The Hindu

In an effort to curb fleecing of customers, the transport department has instructed its officials to crack down on autorickshaws outside malls, theatres and railway stations.

Senior officials said they have been asked to shift the focus of their crackdown from arterial roads to such locations where people gather in large numbers.

Officials said there had been an increase in the number of autorickshaws seized in front of railway stations for overcharging in the last few days. “A large number of autorickshaw drivers operate without permits at the stations, bus termini, shopping malls and big hospitals,” an official said.

Meanwhile, the traffic police’s autorickshaw helpline has received over 2,000 complaints in the past six months about drivers charging exorbitant fares and refusing to make trips to certain areas. Over 4,000 cases against autorickshaws were registered by the traffic police in the last couple of months alone.

The majority of complaints were registered from south and east Chennai.

“Most autorickshaw drivers now refuse to ply when we ask them to turn on the meters. Some of them demand Rs. 20 over the meter fare, while some blatantly ask for excess fare,” said V. Bharath, who works in a company in T. Nagar.

Transport department officials said there were not many complaints from north Chennai as residents there mainly depend on share autorickshaws. “The APE autorickshaws are a hit among fish vendors. Hence, most of them do not use autorickshaws,” said an official.

Madhu Sivaraman, director (projects), Centre for Public Policy Research, whose team conducted a study on autorickshaws in the city, said the presence of malls was one of the reasons for autorickshaw drivers charging excess fare in south Chennai.

“There are also a large number of IT companies in those areas. The drivers charge exorbitantly in places like Mylapore, Adyar and Royapettah as there are not many share autorickshaws,” he said.

 

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