Thursday, January 17, 2008

Aye auto

Bangalore is a nightmare as far as autos are concerned. Oh, add Chennai, Delhi to the list. Actually every city other than Mumbai is a nightmare as far as auto rickshaws are concerned.

In Bangalore, the minimum which is 12 for the first 1.2 or so kilometers is now set to increase to 15 or 20. Why? Because CNG will be more expensive from, 27 to 37 rupees - compare that 50 bucks a liter of petrol.

In Bombay, where rickshaws run on CNG, by and large, the minimum is 10 rupees (the distance is a little lower, but overall, it is cheaper there) and in Navi Mumbai where rickshaws run on petrol the minimum is 11 rupees.

Between the two places, petrol in Bangalore is expensive by about 2-3 rupees per liter than Bombay. Having said that, if you do the math, it is apparent why this is daylight robbery. A small car gives an average of anywhere from 12 to 15 km per liter and that translates into a running cost of about 5 rupees per kilometer (give or take a few paise depending on the cost of petrol). So if you owned a Maruti 800 which gives you about 18 odd kms to a liter of petrol your running cost is barely 4 rupees at todays rate of petrol here, about 50 bucks. And autos on an average here, charge about 6 rupees or more a kilometer when their running cost is far lower and the fuel costs are lower. Add to the odds that every now and then the rickshaw driver will fleece you or haggle with you on the change or take you on an unwanted city darshan and the "cost" of it is simply too much. And then you wonder why people take their own vehicles?

The economics of running an auto are two fold. One, in a place like Bombay where many rickshaws are run by their owners, they get the risk and the return of owning their vehicle. So, they take care of their vehicles, put in all the bling and take care good care of it. (I know that this is changing to a owner renting out to driver model) In most other places, Bangalore included, rickshaws are run mostly by a syndicate who let out their rickshaws to drivers for about 250 odd rupees a shift. During this time if something happens to the vehicle, it is the risk of the driver - not owner. Not surprisingly, they need to make this money and more or they risk losing their daily earnings. And the owner, not surprisingly, does not need to take care of his vehicle. All of which makes it a losing proposition to the end user.

So, this whole game of increasing rickshaw fares benefits who - the auto owner and nobody else. He will up his rental and get the driver to pay more who in turn has to fleece more and the customer, at the end of the day will look for a way to buy a car and get away from this whole hassle of getting into an auto. Ask any Bangalorean...


crucialT said...

Good point, and great blog by the way.

Economics is such an interesting study for many reasons. One aspect of which is "price elasticity of demand." If a legal monopoly autorickshaw operator ("syndicate")is setting the price based on what it thinks the market will bear, then auto users can do nothing but protest and keep using their services because they may not have much of a choice, but they will be still, to the point of "price elasticity demand", dedicated users of autos.

In other words, at some point after price increases above a certain level, they should be able to find a different mode of transportation. At that point, if enough users switch to this mythical (TATA Nano?:-) alternate mode of transportation, the demand should decline and auto fares should decline to the point where it is affordable again.

So you may call it "daylight robbery" but if there are people still willing to pay the higher prices, then more power to them.

I wonder if Namma Tata Nano will be the silver bullet that finally knocks some sense into these corrupt monopoly auto operators?

Neelakantan said...

The obvious other alternative is, competition. So in Bangalore you have multiple city taxi operators and likewise you could have multiple auto operators. The only trouble with this is cartelisation, like radio city operators in Bangalore routinely charge "fixed" fares that are not consistent with their policies and almost everybody else does the same thing. (There is still a silver lining there.) But i agree with you that if people are willing to pay higher prices, through the nose or however, well, it works. And at higher fares, theoretically drivers have to work less harder to earn their daily targets...