eCatalyst - March 2010

Prashant Narang
LLB, University of Delhi
Coordinator of Project Third Wheel, Prabodh

Can I use a bus to go to GK from Hauz Khas? Or say, Metro, when it becomes operational? The only practical option is auto rickshaw or may be a radio taxi. Not just these are available round the clock, but I can get them right at my door step, if I have their number. And of course, these are probably the only options for convalescent, patients, children, aged and sometimes tourists and also in case of emergencies. Indeed it is more comfortable and personalized and since IPT vehicles are most of the time mobile, hence these require parking spaces for minimum time.

It is easier to become an industrialist in Delhi than an auto rickshaw driver, thanks to the policies of pro-poor sarkaar (government) and judgments of pro-green judiciary. See why:

In the year 1985 M.C. Mehta a public spirited person by way of a Public Interest Litigation (P.I.L.) brought to the notice of the Apex court the increasing amount of vehicular and industrial pollution in Delhi.
In the year 1995 the Saikia Committee suggested that Compressed Natural Gas (CNG) be used as an alternative fuel. The Supreme Court ordered that all government cars switch to CNG or install catalytic converters and use unleaded fuel. The use of CNG in commercial vehicles did not become a reality for almost a decade.
On 28 July 1998, the Supreme Court ordered that all commercial vehicles including taxis, which are 15 years old, shall be restricted from plying on the road by 2 October 1998 and all pre 1990 autos and taxis shall be replaced with new vehicles running on clean fuels by 31 March 2000.
The Supreme Court ordered to provide financial incentives for the replacement of all post 1990 autos and taxis with new vehicles on clean fuels by 31 March 2001.
From 1998, all vehicles over 15 years of age were prohibited from plying on Delhi’s roads.
In addition to this the change in fuel-use policy came into force, namely, a switchover from Motor Spirit/Petrol (MS) to Compressed Natural Gas (CNG) as the fuel for public road transport. Consequent to this decision, auto rickshaws, motor car taxis, and buses were obliged to switch to the CNG mode.
On May 1, 2002, the Delhi government banned the registration of any new two-stroke auto.
On environmental grounds, by an order of 19.11.2004, the Supreme Court had also directed that no new permits for auto rickshaws shall be granted in Delh

The not so wise direction was clearly in contradiction to CNG conversion. Mind you, there was not even a whisper about the private vehicles in the series of orders and directions.

Until around the year 2000, most auto rickshaws were owner-driven. After dilly dallying for two years, the government went about implementing this decision in a haphazard and hasty manner, forcing the auto drivers to find and spend Rs.30,000 for retrofitting of their vehicles with CNG kits. The auto owners could ill-afford such a huge expense almost overnight. Formal credit markets such as commercial banks traditionally do not advance loans to the auto rickshaw drivers. The drivers were therefore forced to sell their vehicles to financiers who retrofitted the vehicles with CNG kits. These vehicles were then rented back to the original owners at exorbitant daily rent of Rs. 250 and up, amounting to Rs. 7,000 per month.

This situation also led to the coining of the phrase “Auto Mafia” or “Finance Mafia”. There are valid reasons for the high rental rates though, including the cost of maintenance of a CNG auto which is 7 to 10 times higher compared with a petrol auto. This high cost of the vehicle coupled with the absence of organized credit for the auto rickshaw segment proved a double trouble for pauperized drivers who could not dream of owning an auto rickshaw ever again. Add the abnormally high cost of maintenance of a CNG auto, and the circle of woes is complete.

Most auto drivers live in slums or resettlement colonies. Their children are forced into child labour. Because of the haphazard policies and orders of the Government thousands of auto drivers are forced to depend upon rented auto rickshaws for their livelihood in spite of having spent 30 years or more in the trade.

Here in Delhi, the Government reluctantly revised the fare to Rs. 4.50 per kilometer. In all other Indian cities it is much higher, up to Rs. 7.50 per kilometer. It is not feasible to pay up such high daily rent with this kind of fare structure. This discourages the Auto Rickshaw Drivers to ply by meters and they charge a higher fare from the commuter. Unaware of the unjust policy regime, the commuters misunderstand and blame the ARD. Even then an ARD barely manages to save only Rs. 3,000-4,000 (85-95 $) a month, as he ends up paying Rs. 6,000-9,000 (170- 190 $) a month to the rickshaw owners. A chunk of this saving goes into maintenance of his vehicle, whereas an auto rickshaw driver in Ahmedabad earns Rs 9,000 a month. No wonder, he never says ‘no’ to the commuter.

Why is only a particular model of auto rickshaw allowed? Why not second hand cars? A second hand Maruti costs Rs. 40-50,000. If there is no restrictions on what a private vehicle user can drive, then why so many restrictions on them? That can bring the investment to 1/10th the current amount and thus ultimately benefiting the commuters.

If the government opens up permits, the rentals for the vehicle would automatically come down, hence helping the auto rickshaw drivers to earn an honest living. Though even in that case, the fare structure need to be revised.

Mind you, public transport is probably the only private service/sector in India, where the government enforces a private entrepreneur what to charge for his goods/ services. In Scandinavian countries, neither there is any permit system nor there government fare structure. Hence there are taxi drivers competing with each other trying to provide the best service at minimum charges. For tourists and first time visitors, air port authorities get into contract with taxi companies to ensure that tourists are not cheated.

Interestingly, the Government fixed the fare for radio cabs (company leased cabs that are relatively more modern and luxurious) at Rs. 15 per km. And the deviation was negative, meaning there were radio cabs that were charging below government decided fare. Not because they were non-profit or NGOs but it was of course power of market competition that the government currently does not believe in.

Better the bureaucracy should pull its hands out of deciding fare structure after liberalizing the market and the excuse of traffic congestion holds no ground as auto rickshaws constitute only two percent of vehicles in Delhi.

Is there a restriction in other professions that there can be only a fix number of professionals? No. Then who decides? The market! It is simple demand and supply rule. And why is there restriction on number of autos, whereas there is no restriction on number of private vehicles?

The Khullar Committee formed by the Delhi Government had advocated for allowing branded auto rickshaw companies. The Government should allow brands and co-operatives to emerge in this sector were what it had recommended.

Heavily regulated intermediate public transport has led to drastic increase in private vehicles resulting in heavy congestion and parking problem.

Whether it was zeal to guard green interests or to safeguard the grey interests of Auto mafia, ARDs have been victimized by the unjust policies narrowing their economic freedom. The local commuters have also been hit indirectly by the restrictions and so have been the tourists.

The Government is opting for wrong solutions for this policy problem- so be it providing training or to introduce smart cards, these steps will certainly be unsuccessful. The solution can only and only be policy reforms. And policy makers must get that. Sooner the better!

Interestingly, in January 2010, Delhi's Environment Pollution Control Authority has recommended to the Supreme Court to remove the cap on number of licenses given to auto rickshaws for the same reasons as cited in the Prabodh documentary-the emergence of the auto mafia.

As LYSA chose the theme of “Global financial crisis: Challenges for Liberalism” for year 2009, its Indian Member organizations- Prabodh and CPPR decided jointly to pick up the issue of ‘Deregulating Intermediate Public Transport’ under the annual theme. Pressing for the need for urgent reforms as Delhi approaches commonwealth games 2010, the project calls for abolition of heavy regulations and thus creating many more jobs through liberalization in the currently high demand-low supply sector.

This clarion call for economic freedom has already manifested in form of a documentary focusing on license-permit- fare regulations in the sector and its impact on various stakeholders. With a well-planned dissemination strategy, the documentary tentatively titled as “Third Wheel” will be premiered with a bang in December 2009. The screenings are coupled with an online awareness campaign about the burning issue that includes newsletters, blog and other social networking mediums.

Our partner in this initiative- Centre for Public Policy Research (CPPR) has recently conducted a national level study on the level of freedom street entrepreneurs and other small professions have in earning their honest living. Their research shows similar age-old restrictions and regulations that are stifling the informal sector and keeping those who work in such professions forcefully in poverty.

The research for the project and the documentary production has been spearheaded by Prabodh. The screenings and dissemination will be conducted jointly with CPPR.

This project Third Wheel tries to comprehensively study the problems faced by the auto rickshaw drivers (ARDs) in Delhi because of the vague Government policies. The scourge of unreasonable restrictions is confronted by them even when they are the most important medium of intermediate transport in the capital.