The modern marketing gurus tell us that state regulations are anti-innovative and anti-competitive. They argue that rules and regulations are unnecessary because market forces can effectively regulate industries.
While regulation may not be beneficial for some industries, history has proven time and again that the taxi industry is different. An unregulated taxi industry puts passengers in danger financially and physically, and leads to an unhealthy business environment. But smart regulations ensure all have access to safe, affordable and timely door-to-door transportation. The debate over why taxis should be regulated is now heating up in Sri Lanka as alternative newcomers like Uber gain popularity in cities like Colombo.
Benefits
Technically, regulations ensure that taxis are safe. This involves protecting the passengers and other road users in matters concerning their physical safety. It implies regulation of vehicle standards and driver standards.
In addition, regulations ensure that the driver is qualified and remain qualified. For example, in New York city, every taxi vehicle needs to undergo a 200-point inspection, three times a year. In order to become a NYC taxi driver, one must meet many conditions including going to a taxi school and pass a tough exam to show you are proficient in safe driving and also have excellent knowledge of New York City streets.
Another reason for regulation is passenger protection. The regulations prevent operators in a strong bargaining position from exploiting passengers. The appropriate regulatory measures in these circumstances will be compulsory metering and the setting of maximum fares and/or fare registration plus the advertisement of the fare on the side of the cab.
Dimensions
These are the main benefits. Then comes the implementation of the regulatory system. There are three important dimensions of a regulation mechanism, namely the conferment of monopoly rights, the imposition of entry conditions and the control of fares.
The monopoly power granted to taxis is the exclusive right to ply for hire. Although this has no legally water-tight definition, it is usually understood as the right to search physically for business in the vehicle within a defined area. Such monopoly carries responsibilities, also – such as guaranteeing comfort and safety of passenger.
Imposition of entry conditions may include, limiting the age of vehicles used, insistence that drivers have a thorough knowledge of the area and adequate driving experience, or technical vehicle specifications. Another condition on entry commonly applied is some form of quantity control, usually a restriction on the total number of licensed vehicles.
The third dimension - fares control can take two forms, namely specification of the level of fares and regulations concerning the fares structure. Control of the level of fares can range from laying down the maximum permissible fare or setting a minimum fare to specifying the actual fare which must be charged.
In an ideal situation, when you get into a taxi anywhere, you should know that the driver has the required training standards, that his vehicle has been regularly inspected, he is licensed to carry passengers and his vehicle has proper commercial insurance. As an added level of security, the taxi’s location is typically monitored by GPS.
The enforcement of rules, fares and accountability in the taxi industry should be decided by the respective Provincial Councils. That gives the public a significant measure of control over the industry.
Different types
Today, we find different types of taxis operating in Sri Lanka: three wheelers, mini cars, cars, luxury cars. The major percentage are the three-wheelers. And, we also have Uber, an international service provider, calling themselves as ride sharing network, who operates through the smartphone connectivity. Uber maintains that they are just a technology company connecting passengers and drivers. It, therefore, assumes a limited amount of responsibility for the services customers receive.
Uber types are generally referred to in U.S. jurisdictions as Transportation Network Companies (“TNCs”).
Uber argues that passengers will pay less than other service providers, while drivers will earn more. But the facts don’t support that. Uber’s fares vary according to demand. The high fares - a product of Uber’s demand-based “dynamic pricing” model where users are charged more during high demand periods, and comparatively less when it’s slow -have sparked outrage and threats from users to revert to using an old fashioned, government-regulated fare system.
Policy statement
This writer believes what we really need is a national policy for the regulation of taxi industry, including three-wheelers and online ride-sharing organisations. The following are few of his random thoughts.
1. Market definition - The Transport Ministry should prepare a national policy for taxi and private hire services. Once it is approved, each Provincial Council should be given complete authority over the taxi business within each province. Taxi services, as a whole, must be regarded and regulated as a “public utility.”(In the case of three-wheelers, the organisations representing the interests of three-wheeler owners can act as licensees).
2. Licensing – Provincial Councils can issue license to taxi operators. The license must be displayed in a prominent place.
3. Economy vs deluxe - New policy has to decide on the categories of taxis, whether to keep the present structure as it is or to change.
4. Fare regulation - The fare for each type of taxi should be decided by the Transport Ministry of the Central Government, who will suggest minimum as well as maximum fares to be charged. While fixing the tariffs, the Ministry may engage the services of transport economists and related experts who would be able to provide a scientific approach to determination of tariffs and permit charges. Further, for pre-booked trips over 50 km (return), prearranged half-day or day tours, the tariffs should not be regulated and be allowed to be determined by market dynamics.
5. Fare meters - Either the electronic fare meter or mobile fare application may be used. However, the algorithms used for distance and fare calculation, should be checked and validated for accuracy. Quality of these software applications should also be audited by from an agency authorized by Central Government. The meters needed to be checked by an Authority at least twice a year.
6. Surge pricing - New policy should recommend range bound dynamic pricing to be allowed to effectively match demand and supply. The passenger should be notified about the surged tariff when he places the order. The maximum tariff may be permitted up to 50 per cent of the tariff. To increase the availability of taxis during the night time, maximum tariff is allowed up to two times that of minimum tariff from 12 midnight to 5 am in morning. This would ensure adequate supply during peak hours and at night.
7. Drivers’ regulation – Provincial Councils may place appropriate cap on the duty hours of drivers in the interest of road safety and in consonance with labour laws. Drivers must also be at least twice a year to check their fitness to drive. Any complaints received against drivers must be quickly and effectively dealt with.
8. All licensees/drivers must abide by all relevant statutes. A driver must have a clean record and be of “good moral character” and taxi licensees will be responsible for the quality of drivers, their police verification, and their conduct with passengers.
9. Licensed organisations must establish and maintain a call centre or a web portal. Licensees will be required to maintain a minimum fleet of 200 taxis (or 500 three-wheelers) and taxis must be fitted with a panic button so that, in case of any distress, a signal will be transmitted to a control centre of the licensee and then to the nearest police station. A GPS or GPRS system must also be maintained in order to keep constant communication with a “central control unit” of the taxi service.
It is clearly important that our taxi services should operate efficiently and that the services provided should meet the aspirations of the users. Whatever policy structure finally decided upon, should enable the development of innovative services to contribute towards achieving public objectives that are characterised by ‘acceptable’ waiting times, high levels of safety and quality (including reliability of service), and affordable prices.
Add new comment