10 September 2006

Give the autowallah his due

Chances are, if you've lived in Delhi for any length of time, you've had to haggle with any number of autowallahs who refuse to travel by meter. You've cursed them for being corrupt and fleecing poor, helpless commuters. You've decreed that autowallahs are a species that fall in the same genus as lawyers and politicians in that they have no moral character whatsoever.

Well, think again.

You know, if you visit Mumbai or Bangalore, nearly every autowallah runs by the meter. And its not that people in Mumbai are more honest or idealistic than people in Delhi: politicians and lawyers exist there as well, exhibiting more or less the same characteristics as their counterparts in Delhi. The reason that Delhi autowallahs don't run by the meter is simply that peolpe are willing to pay more than what they are obliged to pay by the meter.

Lets face it - the rate structure displays a strong anti-autowallah bias in Delhi. In Mumbai, the rate is Rs. 9 for the 1st km and Rs. 10 for every km thereafter. In Delhi, the rate is Rs. 8 for the 1st km and Rs. 3.5 for every km thereafter. That means an auto ride should cost about a third for the same distance in Delhi as it does in Mumbai. How fair is that? Is fuel so much cheaper in Delhi? Or is the auto chassis that much cheaper? Clearly not.

What the meter throws up in Delhi is, therefore, way below what the commuter thinks the service is worth. So he agrees to pay some more. If all commuters decided not to travel at rates above the official one, do you think that autowallahs could charge the rates they do?

If all this sounds like a load of bull to you, hang on. There's a lot of economic logic behind this argument. The market for auto services can loosely be characterized as perfectly competitive. The price established via the demand supply equilibrium is widely regarded as the optimum price. If the administered price is below this optimum, then comuters will be more willing to travel by auto while autowallahs will be less willing to take on commuters. There will be a shortage of services and there will be tendencies for the price to rise. But since the price cannot rise legally, it does so illegally. A black market gets formed with the price colser to the market price.

3 comments:

  1. OK...one thing autos in B'bay run on petrol or diseal but autos in Delhi run on CNG which is much much cheaper.
    "
    What the meter throws up in Delhi is, therefore, way below what the commuter thinks the service is worth. So he agrees to pay some more. If all commuters decided not to travel at rates above the official one, do you think that autowallahs could charge the rates they do?"


    Yeah dude...thats the power of unions! We give in cause there is not much choice. There has beena sufficient dip in the high prices ever since the Metro came out but only on those selected routes.

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  2. oh, so bbay doesnt have unions? and u forget - unions dont have the power to ILLEGALLY raise rates. they do so legally.

    there's no choice? buses? metro? taxi? nothing?

    and FYI, petrol is only 1.5 times as expensive as cng. diesel costs almost the same. still no reason to justify a 3 fold price difference.

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  3. oh, it just gets better. cng, not petrol is in fact used in autos in bombay. so fuel cost is also roughly the same.

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