As Delhi prepares for this fall’s Commonwealth Games, a fierce debate is raging over how best to transform the place into a “world-class city”. Some – like chief minister Sheila Dikshit – argue that banning auto rickshaws is a key step. Others maintain that auto rickshaws are a vital part of Indian cities’ transportation systems, and that the path to “world-class” requires reforming the sector, not outlawing it.

A look at the inner workings of the auto rickshaw sector in last week’s Indian Express shines some light on this debate – and on some current practices that are decidedly not world-class. (An unabridged version of the article can be found here).

The article explains that 80% of auto rickshaw drivers rent their vehicles from financiers. They pay Rs 250-300 ($5.50-$6.60) for 10-12 hours and earn the same amount in profit. In other words, half of their daily earnings go to rent and fuel. The remaining 20% of drivers “own” their vehicles, though most are repaying large loans to the financiers from whom they purchased the rickshaw and the required permit. Monthly payments are Rs 9,000-15,000 ($200-$330).

Recent transportation policies have worked in favor of the financiers. The cap on the number of vehicles mandated by the Supreme Court in 1997 meant that no new permits could be issued or sold, though Delhi’s size and population were growing. As a result, permit prices skyrocketed and a black market emerged. Today, after a decade of black market inflation, the financiers are profiting immensely. Additionally, rising demand for rented autos by new migrants coupled with frozen supply translate to inflated rents.

Rickshaw drivers were hit again when the Supreme Court ordered the conversion of all public transport vehicles to compressed natural gas (CNG) by 2002. This cost owner-drivers Rs 30,000 each ($665), an expense most could not afford, as evidenced by the 33% drop in the number of auto rickshaws between 2000 and 2002. Thousands of owner-drivers were forced to sell their vehicles and permits cheaply to financiers.

As a result, financiers now hold most of Delhi’s auto rickshaw permits. However, they keep them in the name of the original owner who sold the vehicle years ago. When a new driver comes up with the Rs 4 lakh ($8,880) for the rickshaw/permit package, the permit will be transferred to his or her name. Until then, he drives “illegally.” Renter-drivers face similar issues. The permit is filed under the financier’s name, or a fake name to cover the financier’s activities, so in the eyes of the law, the renter is driving “illegally.”

Financiers also use other methods to control drivers. The financier sometimes makes the driver — often a new migrant to Delhi — sign blank loan contracts. This gives the financier the power to raise interest rates and deny the driver ownership even when the loan is fully repaid. It also allows him to charge extortionate “penalty charges.” Many owner-drivers have been repaying loans for years due to compound interest and “late payment penalties” of up to Rs 30,000 ($665). The financier can then repossess the auto rickshaw and start the cycle all over again with another driver. Some vehicles have been “sold” and repossessed five or six times.

Other challenges faced by auto rickshaw drivers:

• Drivers must carry 16 documents with them at all times
• The transport department’s application process for these documents requires a long list of supporting documents (and when it’s impossible for drivers to produce them, this leads to bribery)
• Traffic police often subject drivers to penalties for missing documents, incorrect uniforms or incorrect lettering on their vehicles

With all this corruption and poor regulation, it is no wonder that the auto rickshaw sector is thought of unfavorably by some. Nonetheless, auto rickshaws are a vital part of Indian cities’ transportation systems. They provide low-cost mobility and last-mile connectivity in places struggling with unprecedented motorization and deteriorating air quality. Additionally, rickshaw driving serves as a livelihood for some of India’s poorest citizens. The answer is not to ban auto rickshaws, but to reform the sector, starting with the issuance of new permits. A “world-class city” is not one that prioritizes the needs of the wealthy, promotes polluting forms of single-occupancy transportation, and allows its most vulnerable citizens to be cheated as they try to earn a living. Instead, a truly world-class city provides high-quality, comprehensive public transportation; acts urgently to clean the air and improve citizens’ health; and enforces fair and reasonable regulations that protect the working poor.