During my talk at the Takshashila Chennai Shala in 2011 (related Pragati article here), I had argued that the underlying reason for market failure in Chennai autorickshaws was regulatory failure. Despite costs for auto rickshaws going up significantly, I had argued that the regulated fare was a lowly Rs. 7 per kilometer, because of which no auto rickshaw in Chennai traveled by meter.
In the same talk I had argued about the benefits of having a regulated fare (no time wasted in haggling, etc.) so this new move by the Tamil Nadu government to regulate auto rickshaw fares is welcome. Note at the end of the article that someone from the Auto Rickshaw Drivers union has welcomed the new fares. This, and the fact that the fare has been set rather high (compared to other Indian cities) should hopefully lead to wide uptake in the use of meters among auto rickshaws in Chennai.
This stabilization in price, I argue, will lead to greater use of auto rickshaws by the general public (since there is no uncertainty now) and should also contribute to greater revenues for the drivers, thus creating a strong ecosystem.
The graph below compares the per kilometer auto rickshaw fares in different cities in India. Note here that Chennai is the most expensive. My argument, however, is that given the unregulated market that is in place now, this higher fare is a reasonable price to pay for good regulation and fair fares.
