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India: Delhi’s auto-rickshaw drivers are caught in a hard grind

by Simon Harding, 25 March 2010

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Auto meters for people

CM Sheila Dixshit’s promise to scrap auto-rickshaws shocked Delhi‘s auto-drivers and commuters. Autowallahs “harass” passengers, she complained and many are plying the streets “illegally”. With the Commonwealth Games this Summer, the eyes of the world will turn to Delhi. Auto-rickshaws do not fit with the CM’s desire to see visitors return home convinced “that they have been to a truly civilised city”. She promised futuristic battery-powered taxis, which thrilled middle-class Delhi.

But before the auto-rickshaw and auto-drivers can be condemned, we must understand how the Delhi’s auto-rickshaw sector operates. Some questions need to be answered: why are Delhi’s autowallahs so greedy? Why won’t they switch on the meter? Why do so many ply “illegally”?

There are two types of auto-driver: Renter-drivers rent autos from contractors who own multiple vehicles. They pay Rs.250-300 for 10-12 hours and earn the same amount in profit: half their daily takings goes on rent and CNG. Today, 80% of autowallahs are renters.

Owner-drivers own their machines, although ’owner’ is misleading as most are repaying huge loans to auto-financiers from whom they purchased the auto-rickshaw and the auto-permit (compulsory for legal ownership). Owner-drivers make an upfront payment and then borrow the remainder from the auto-financier. Once the loan is repaid, the auto-financier transfers the auto-permit into the new owner’s name. Monthly loan repayments are Rs.9000-15000.

In 1997 the Supreme Court capped the number of autos in a bid to cut emissions from vehicles. No new auto-permits would be issued. No auto-permits could be sold either. Delhi’s population grew but the number of autos did not. Consequently, the price of an auto-permit rocketed and a black market for permits emerged. Auto-financiers found themselves in a lucrative position as their existing stock of auto-permits became a precious commodity. In the late 90s, a new auto-rickshaw with permit cost Rs.1-1.5 lakhs. Today, after a decade of black market inflation, the same package costs Rs.4-4.5 lakhs: Rs.1.45 lakhs for the new auto, Rs.3 lakh for the permit.

The cap was also good news for contractors. There were no new auto-rickshaws, but the number of willing drivers surged as migrants continued to arrive in search of employment. Demand for rented autos rose but supply froze, allowing contractors to hike rents.

A second policy further strengthened the hand of the financiers. In 1998, the Supreme Court ordered that public transport vehicles must convert to CNG by 2002. Owner-drivers faced a Rs.25-30000 bill for a CNG conversion kit and the threat of having their precious permits cancelled if they did not comply. In 2000, Delhi had 83000 auto-rickshaws. In 2002 there were 55000. Where did these autos go?

The average owner-driver could not afford a Rs.25-30000 CNG-kit, so ’soft’ loans were made available from the Delhi Finance Corporation. However, an auto-finance cartel paid officials in the Transport Department for two fiddles: firstly, to stall the ’soft’ loan scheme, denying drivers credit and, secondly, to arbitrarily cancel thousands of auto-permits . Consequently, thousands of drivers could not convert their autos to CNG and had to sell their autos and valid permits cheaply to financiers. Others had their permits voided and were left unable to legally drive their auto-rickshaws: selling them to a financier was the only option. By cancelling and hoarding permits, financiers and the Transport Department conspired to get rid of 30000 autos, sending permit prices spiralling.

Financiers hold most of Delhi’s auto-permits. But these permits are in the names of the original owners (not the financiers), who sold their vehicles years ago. When a driver buys the Rs.4-4.5 lakh auto and permit package, the permit will be transferred into his name only when he has repaid his loan. Until then he drives “illegally”. Renter-drivers have he same problem as the auto-permit is in contractor’s name or a false name to cover the contractor’s activities.

Delaying permit transfer is just one of the weapons in the financier’s armoury. Financiers do whatever it takes - fair or foul - to keep control of their autos.

Many autowallahs come from rural Bihar and UP. They have little experience of contracts and business. They do not realise that the financier’s practices are dubious, exploitative and illegal.

The financier will make the driver sign several blank loan contracts. This gives him 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” and to trade the driver’s debt on the black market. Many of Delhi’s owner-drivers have been repaying loans for many years due to compound interest and “late payment penalties” of up to Rs.30000. The contract maximises the financier’s ability to repossess the auto-rickshaw. Once snatched back, it can be sold to the next driver. Financiers have sell and repossess the same vehicle five or six times.

The financial pressure on the auto-driver does not end here. The Transport Department and the Traffic Police take their cut from drivers.

Auto-drivers must carry around sixteen documents with them at all times. These documents are ’available’ from the Transport Department on application. However, each application requires a long list of supporting documents, which most drivers do not have and have little chance of obtaining: A fifty-year-old Bihari driver may be asked for his old school certificates whilst Delhi ID and ration cards are standard for many applications, documents which migrant drivers do not possess. Aware that these requirements are impossible to meet, Transport Department officials solicit bribes from drivers to overlook gaps in applications and often even to process complete applications.

Due to the amount of paperwork a driver must carry and pedantic traffic rules, the Traffic Police can to stop auto-drivers and find an excuse to challan them retrospectively. If the officer simply keeps asking to see documents, he will to find one which is missing. If not, then he can issue a challan for “wrong uniform” (including “wrong socks”), “incorrect lettering on auto” (Rs.1500) or “illegal stopping” (Delhi’s 312 auto-stands are unmarked - no-one knows their locations). Often the challanning officer simply pockets the autowallah’s money.

Auto-drivers are not naturally nasty people. They are struggling under huge financial pressure. They pay half their daily wage as rent or hand over lakhs to financiers for their outrageously priced vehicles, which they will probably never legally own. Transport Department officials demand bribes for basic services and they represent quick, easy cash for the police. Somehow, in the midst of all these repayments, rents, bribes and challans, the autowallahs must feed their families. Who can do all this on just Rs.4.5 per km? No wonder they won‘t go by the meter: their families would starve.

Auto-rickshaws are a vital part of Delhi’s infrastructure: they are efficient, affordable, economical, iconic and environmentally friendly. They cannot be scrapped. Instead, the whole auto-rickshaw sector must be reformed, starting with the issuance of new permits. To become a “world class city” Delhi does not need more taxis and cars; it needs a bigger, better fleet of auto-rickshaws to provide public transport to residents and livelihoods to drivers.

The author is a researcher at the Aman Trust, New Delhi. The paper is based on the research that AMAN is conducting on informal labour.