Bangalore’s Auto-Rickshaw Drivers – Time to Reform? – 3

Bangalore’s Auto-Rickshaw Drivers – Time to Reform? – 3

(In the previous two posts (Part 1 and Part 2), I brought up the issue of Bangalore’s auto-drivers. Everybody has a problem with them. But they have a problem too, which we apparently don’t care about. They are running a business, but look at the amount of the regulation. They are socialist relic in a capitalist world.)

So what do we do?

Look at the current situation now. It is the classic grey market. A lot of people want to ride in autos at the metered rates, but it is not easily available. Hence, the auto-wallahs are willing to give the ride at a higher price, at a price that he sets. Take it or leave it.

How do you tackle a grey market? Legalise it! That, I think would be the silver bullet for all the problems. Let them charge what they want, and the competition would take care of the prices. We let competition take care of prices for medicines, for atta, rice, clothes, cars and even houses. Why not auto-rickshaw fares? What’s so different about that?

There are taxi companies in the city and nobody checks their fares. They do it themselves, because they know if they consistently overcharge without providing any real additional value to their customers, the customers are more likely to go to the competition. It happens in all the businesses. Why shouldn’t it happen in this one?

~

“Oh no, but they would start charging too much. They are part of a union, and they would have a strong tendency to collaborate, bringing the whole concept of competition down to its knees. Given a choice, they would keep on increasing prices, till it is more viable to buy a car.”

Good point. Collaboration would definitely destroy this idea. So let us take cues from other sectors. How do they stop collaboration there? The Monopolistic Trade Restrictive Practices Commission simply breaks it up, but there is a crucial difference here. They only regulate firms under the Company Act, so on and so forth. These auto-rickshaw drivers are one man companies, pretty much entrepreneurial ventures. They wouldn’t come under these laws. Just like the kirana shops.

But there are millions of kirana shops, and we don’t have any problems of overcharging from them because they don’t tend to collaborate. Auto-wallahs will tend to do that infinitely more than kirana stores.

~

So, incorporate them. Make them into firms. There isn’t just one union in Bangalore, there are atleast 2 or 3 major ones. I am sure each one of them would be made of many smaller subunions. Maybe we could choose a critical number of 5,000 autos. To run an auto, you need to be part of a firm, and a firm would had to have atleast 5,000 autos. So in that way, at every point in town, a passenger would have access to autos from atleast 2 or more firms.

Let them fix the prices then, the firm should be run as a company, with the auto-wallahs being salaried/commissioned employees of the firm. Once they are a firm, you can regulate the hell out of them, and come down heavily on them, if they even think of collaborating.

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2 responses to “Bangalore’s Auto-Rickshaw Drivers – Time to Reform? – 3

  1. Vivek, I have thought long and hard about creating open competition in the past. It will not work for many reasons. Two prominent ones being that

    1. there are fare flung areas in every city where autos are difficult to come by. Imagine that an auto comes along and there are 3 sets of passengers waiting.

    2 autos are almost always in short supply during the peak hours. Should the fares touch stratosphere in those hours?

    My view is that auto drivers are generally not ambitious people. They will be content earning decent money and respect. So, if fare could be fixed taking into account all factors and without bringing politics into it, the auto drivers may act honestly and reasonably. Political honesty is the key here.

  2. Well, that is because you haven’t taken into account the economics of the whole thing properly. As soon as people can see auto-drivers are allowed to charge whatever they want, more people will enter the industry. It is also possible some big guy, maybe not as big as Ambani, but somewhat big could also enter the game.

    High prices always draw in more firms/players into the industry, which would take care of the dearth of competition. Of course, the transition period from a pure socialistic environ to an ideal capitalist scenario, is painful, no matter where it is, but it is a good solution nonetheless.

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