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Eliminating Price Bargaining from Auto Rickshaw Services in India

Formally integrating the auto rickshaw industry into the country's transport system will be a challenge worth tackling. Photo by rachel in wonderland.

Bargaining is an expected and important ritual of shopping in India, yet its extension to transport pricing in the auto rickshaw service industry has inspired many to find a lasting solution to avoid the negotiation process. We highlighted one of these examples, the G-Auto service in Ahmedabad, India, in a recent Q&A.

The reason bargaining has become a part of the commuting experience is tied to the ban on auto rickshaw permits. Cities like Delhi, Mumbai, Bangalore and Pune are no longer issuing permits to auto rickshaw owners for fear of increasing traffic congestion. But such bans have only increased the illegal and high-priced resale of permits and has led drivers to tamper with meters to make up for the debt they accumulate in renting their vehicles and obtaining high-priced permits.

Lack of access to credit, as well as high interest rates on loans, only complicates and adds to the financial worries of auto rickshaw drivers, further compelling them to deceptively price their trips.

“Auto drivers are in the grip of private financiers and, moreover, governance is playing a big role in determining the economics of this operation, escalating costs, impacting the behaviour of the driver and increasing victimization of passengers,” said Akshay Mani, a transport specialist at EMBARQ India, part of the global network of EMBARQ, the producer of this blog, during an interview with LiveMint.

Based on a joint study between EMBARQ India and Mint, some of the ways to alleviate the financial burden on auto rickshaw drivers is to eliminate government interference with tariffs, which would increase competition. The study also suggests removing permit quotas and limits, which drive up permit prices and increase debt. Increasing credit access through micro-payment systems and integrating auto rickshaw services at airports, metro and railway stations can also help with the formal establishment and assimilation of this service with cities’ existing transport industry.

Cutting down on operational costs and increasing revenue through creative means will also be an important step in lifting the financial burden off of auto rickshaw drivers. Formalizing this sector and eliminating meter tampering will also rely on growing the scale of operations. “Advertising revenue can certainly prop up driver incomes,” adds Mani during the interview. “But any branded or dial-an-auto service cannot sustain at levels of 50-100 vehicles. You have to scale up to 1,000-2,000 auto rickshaws as only then vehicle capital and maintenance costs can go down (through bulk discounts) and technology investments can reduce unnecessary trips and cut fuel costs.”

Learn more about the transformation of India’s auto rickshaw industry here.

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