Kejriwal Is Wrong To Stop Surge Pricing By Ola, Uber

Published: April 19, 2016 20:16 IST
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Why does the price of onions not remain constant? Why does it keep going up and down, sometimes so wildly that it makes parties lose elections?

It's the supply. The scarcity of onions - whether it's caused by hoarding or a poor crop output - increases its value. That is why its price goes up.

Delhi Chief Minister Arvind Kejriwal doesn't seem to understand demand-supply economics. He's threatened Uber and Ola (cab aggregators as they are called) with regulatory action if they don't stop surge pricing. Surge pricing is like that rise in the price of onions. Soon we'll have the government deciding air fares - and, while we are at it, how is the Indian Railways allowed to charge us more for Tatkal and even more for "Premium Tatkal" tickets? 

As a regular user of both Ola and Uber, I hate it when I see the prices surging - especially when I have to catch that 5 am flight and both services are asking me for 3-5 times the usual price. I check if it's going to cost more than the fixed Rs 500 that my neighbourhood black-and-yellow taxi charges me.
 

Delhi Chief Minister Arvind Kejriwal carpools with Health Minister Satyender Jain during the odd-even car scheme in New Delhi on Monday (Press Trust of India photo)

Threatening Ola and Uber with regulatory pricing is anti-free market, anti-capitalism and anti-logic. If Ola and Uber are "fleecing" customers, let customers dump them. Incidentally, even if Ola/Uber are surging at 2X, they are cheaper than the Meru service or the overcharging black-and-yellow taxis that used to rule the roost.

Why should the Delhi government decide how much a private taxi service should charge? If I want to start a taxi service that charges Rs 1,000 per kilometer, and I can find customers willing to pay that, who's the government to prevent this transaction? 

Arvind Kejriwal's threat has portrayed a negative image of the national capital as a place that does not respect free markets, is hostile to start-ups and does not promote ease of doing business.

You may not buy this argument. Perhaps you could say a 5X surge during a special situation, such as the odd-even scheme, is outrageous. It is still ironic that Mr Kejriwal, of all people, is concerned about Ola, Uber over-charging citizens of Delhi, because he has never expressed any concern for citizens when they are over-charged by auto-drivers. Mr Kejriwal's government tried its best to ban Uber, Ola on safety grounds but failed in that endeavour. Now, he's interfering with their business models.

If Mr Kejriwal really wants to drive Uber and Ola out of business, I can help him with better ideas. What he needs to do is to give Delhi a lot more and a lot better public transport. It should be so easily available, so comfortable, cheap and time-saving that customers should stop using Uber, Ola.
 

Taxi apps Uber and Ola have stopped surge pricing after a firm warning was issued by Chief Minister Arvind Kejriwal against taxis trying to take advantage of the new round of traffic restrictions dubbed the "odd-even" scheme (AFP photo) 

The spread of Ola, Uber hasn't really driven auto-rickshaw drivers to penury, hasn't forced them to look for other jobs. Logic would have it that when people shift to Uber, Ola, then auto-rickshaw revenues should come down. If you speak to auto-rickshaw drivers, they will tell you they haven't suffered. Never mind what a BJP-affiliated auto-rickshaw union says.

There have been large strikes and protests in many cities across the world by old-school cab drivers against Uber. In India, and especially in Delhi, that hasn't been the case. Mr Kejriwal may want to wonder why. Once again, it is demand-supply economics. The demand for transport in Delhi-NCR is huge, the supply always wanting.

Okay, so the Delhi Metro is working to open new lines soon, and increase the number of trains and coaches. Fine, one understands it's not easy to find land and build new bus depots, and it will take time to bring thousands of new buses on to the roads. But what about auto-rickshaws?

Auto-rickshaws are CNG-driven, cheaper than even venture capital-subsidised Uber, Ola. They take less road space than cars, create employment, and many women think autos are safer than taxis.  

Delhi has the lowest ratio of auto-rickshaws to population among India's metros, according to a Delhi government study. When the Supreme Court was ordering conversion of polluting diesel auto-rickshaws to CNG, it banned the issuance of new auto licenses. Years later, there are no diesel auto-rickshaws but the ban stays.
 

Delhi has the lowest ratio of auto-rickshaws to population among India's metros

Every now and then, the Delhi government, whether it is headed by Sheila Dikshit or Arvind Kejriwal, goes to court and gets permission to issue another few thousand licenses. Since these licenses are scarce, an auto-mafia does its best to rig the pricess. Kejriwal, who had all the policy solutions to our problems when he was spear-heading the Lokpal movement, has asked the CBI to investigate the distribution of auto-rickshaw licenses in Delhi.

Delhi's Lt Governor Najeeb Jung may be a controversial man, but he did one good thing between Mr Kejriwal's two stints as Chief Minister. He went to the Supreme Court and asked for another 2,00,000 auto-licenses to add to the existing 1 lakh-odd autos. One doesn't know what happened to that petition since Mr Kejriwal became Chief Minister. What is very clear is that Mr Kejriwal's government has shown no eagerness to bring more autos on the roads.

The end result is a demand-supply gap in auto-rickshaws. Since autos are scarce, it is AUTO-DRIVERS who are king. They won't ply by the meter, and refuse to take you where you want to go. It's a tiresome experience trying to hail an auto in Delhi. But I don't blame the auto-wallah. The auto-wallah can charge me whatever rate he likes, because he knows I'll have to wait a lot before I can find the next auto.

The Kejriwal government says it is doing various things to improve public transport in Delhi, but is curiously silent about the scarcity of auto-rickshaws. In 2014, when I met Saurabh Bharadwaj in 2014, the first AAP government's Transport Minister, he hinted that AAP feared auto-rickshaw drivers, who were critical to the party's election campaign, losing business if there are too many new autos. This may well explain why the AAP government isn't happy with Uber, Ola.

If Mr Kejriwal understands demand-supply economics, he will go to the Supreme Court and have the license-quota raj for auto-rickshaws dismantled. But he will have to trust the market for that. After all, distributing auto-licenses are a form of political patronage. Why would he let go of this power?

(Shivam Vij is a journalist in Delhi.)

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.


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