The bargaining has a price

Auto-Rickshaw in New Delhi

Riding an Auto-Rickshaw in New Delhi can be quite adventurous. Not so much because of the infernal New Delhi traffic, but because of the bargaining before you get in. Why do the Auto-Rickshaw drivers push prices so hard? They are fighting to survive, I learned.

The New Delhi Auto-Rickshaws are part of the public transport system of the Megacity. Their door-to-door service is very convenient, I take the Auto-Rickshaw every morning to go to work. My office is located a 15 minutes ride away from the place where I live. 

So you just get out in the street and start looking for one of the green-yellow three wheelers. Once an Auto-Rickshaw stops beside you the procedure of price haggling starts from scratch every morning.

Fair fares

The very first time I stopped an Auto-Rickshaw in Delhi, the driver was reluctant to put the meter. The meter measures the length of the journey converting it into a fare in rupees. A price-scheme is set up by the municipality: First two kilometers cost 25 rupees, every additional kilometer 8 rupees. After 11 pm the fare is up 25%.

The problem is: the driver wants a better price than his meter is showing him. So the negotiating begins. The driver usually starts at 100 rupees at daytime, you will start a bit below the real fare. During rush hours and late at night the prices skyrocket.

Meter’s luck

On my very first ride the driver for some reason – maybe it was pity with a white face – finally decided to put that meter on. Only weeks later I realized how lucky I was. It turned out that every Delhi Auto-Rickshaw driver is reluctant to put the meter. My first driver was no exception. Since I had the chance to see the correct fare once – it was 53 rupees, about 75 cents – I knew exactly how much my ride to work would cost and could bargain much better for the next rides. 

Depending on the time of day, the availability of passengers and your destination, drivers will sometimes simply reject your offer and head off. Well, passengers in New Delhi streets are sometimes rather beggars for transport facilities than kings. 

Creative pricing

What I find fascinating – as well as at times annoying – is the fact, that Auto-Rickshaw drivers are very creative when it comes to justify their overpricing. Let me give you just a few examples:

Early morning hours passengers are usually not queuing yet. Still there is „early morning“ charges. Lower demand higher price?
Since I want to ride to a diplomatic area, there is a „VIP-tax“ on the ride.
Putting the meter means that there will be additional charges.
Bad luck if you decide to move around on a Sunday – there is an extra Sunday fee.
A suspected traffic jam ahead automatically raises the price.
To pick up a friend will add to the charges, even though it is on your way.
The biggest disadvantage though is probably your white face – this automatically doubles the price.

If you feel it’s way overpriced, you can always try the next Auto-Rickshaw. Don’t try that during rush hour though. You will never find a cheaper one. 

Exploited drivers

Foreigners in New Delhi often get angry when they are being overcharged. However, trying to bring the price down as low as possible they actually hit the wrong person. The question is: Why are Auto-Rickshaw drivers so reluctant to put the meter and systematically try to overcharge passengers?

A governmental study has revealed the reasons for that. Monthly earnings of drivers – be they owners of the Rickshaw or leasing it – are low. Most drivers (estimated 80%) are not owners, but lease the Auto-Rickshaws from fleet owners. Owner-drivers are better off than lease-drivers, because they need not pay monthly leasing fees to fleet owners. 

The reason for the low earnings of the lease-driver is predominantly determined by institutional factors: Municipality regulations in New Delhi resulted in a monopolistic structure of the market, dominated by a few fleet-owners that rent out the Auto-Rickshaws to a low skilled work force. These workers – mostly from rural areas – have no chance to get cheap loans from a government bank. For any expenditures as well as for the Auto-Rickshaw permits they rely on more expensive informal credits from dubious financiers. They overpay.

Overpay – overcharge

The monopolistic structure emerged after a municipal policy change in 2002. The number of Auto-Rickshaws was capped and they had to operate on more expensive but environment friendlier compressed natural gas (CNG). Many owner-drivers could not afford the change from petrol to gas and were forced to sell their Auto-Rickshaws. Already existing fleet owners took over and so the monopoly was strengthened further. Most of the 83’000 Auto-Rickshaws in Delhi now belong to fleet owners.

This might explain better the drivers reluctance to charge fares on the basis of a meter. As they are increasingly exploited by the financiers and fleet owners, they have no other option than to overcharge their passenger to pay back their debts. Every additional rupee will lessen their burden. Once you understand that, you might be more ready to put that extra 10 or 20 rupees into the pocket of the Auto-Rickshaw driver. He is simply struggling to survive.

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