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Tuesday, March 23, 2010

Taxi companies in Bombay: an episode in India's urban transportation

by Ajay Shah.

The problem

The best thing that you can ask for, in getting around a city, is a comprehensive underground metro system, where a tube station is at worst 200m away from wherever you might be. There is no city in India that has this. While the Delhi Metro is very impressive, it is still not aiming to intensively criss-cross the city in this fashion (a walk of no more than 200m to the metro station from any point, i.e. a grid of lines which are no more than 400m apart).

The next best thing you can ask for is: well functioning taxis. A good success story in India is the black/yellow taxis of Bombay. They are ubiquitous, can be hailed down on the fly, will charge you by the kilometre, and the meters are not grossly off. I am not aware of any other city in India where taxis work like this. But the quality of vehicles is atrocious, and the customer experience unsatisfactory.

Air-conditioned taxis were tried in Bombay but collapsed into the wrong equilibrium. Customers came to believe that the meters were tampered with, so there were few customers, so the only way to make ends meet for the provider was to tamper with the meters, and so on. Somehow, the law enforcement, which went into ensuring veracity of meters of the traditional black/yellow taxis, did not come about with the blue taxis.

The solution

So it was a big step forward when the Maharashtra government setup a policy framework for corporations to setup a fleet of taxis, as is found in most good cities outside India. These are high quality vehicles. The Transport Department of the Maharashtra government, through its RTOs and the Weights and Measures Department, takes responsibility for ensuring that the meters are not tampered (and this is easily verified by the corporations operating these fleets, thanks to GPS and GPRS). Access through call centres and the Internet makes it easy to call a cab. In addition, as the number of taxis per city builds up, it becomes feasible to just step out into the street and grab one.

The place where I noticed this change the most was at the domestic airport. As a traveler, an incoming flight would bring me to the Bombay airport. I would then walk to a dedicated bay which could hold two taxis at a time, and grab a Meru. This would take me anywhere, with metering by the kilometre, and no fuss. It was just great.

The collapse

This worked so well, it took away business from the traditional black/yellow taxis. There were bays for 20 traditional taxis and 2 Merus at the airport, but customers would line up for the Merus while the traditional taxis stood around without customers. Bombay unfortunately has a trade union of taxi owners. They created a ruckus about this, engaged in a little violence, and pressurised the local government and the airport. In a sensible market economy this should have been no issue. Violence should have been dealt with by the police. Meru's services should have continued to make progress regardless of what the incumbent felt.

The authorities buckled and Meru was evicted from the airport. That is, the 2-bay which they had earlier been given was taken away. So the traveler could no longer step out of the plane, step out of the terminal and grab a Meru.

To me, these events symbolised the governance problems of India. Here you had a very nice new piece of infrastructure. The incumbent (black/yellow taxis) should have lost market share when the new technology came in, and that creative destruction was taking place just fine. But the incumbent then engaged in hooliganism. The forces of law and order did not work effectively in blocking small-scale violence at the street level. The authorities did not have the spine to think about what was best for the users of the airport. The rule of law was not strong enough for Meru to enforce its rights as a legitimate taxi operator authorised by the government - the 2-bay which had been promised to them was taken away. It was a black mark for the quality of governance in Bombay and in Maharashtra. A very nice initiative that had improved the airport lay in shambles.

I single out Bombay and Maharashtra here because Meru is also operating in a few other cities, and this kind of collapse did not come about in any of those cities.


In recent weeks, Meru has comprehensively solved this problem. Here are the steps that I went through a few days ago:
  1. As I was stepping out of the plane, I called 4422-4422
  2. At the menu, I punched 5: a hotkey which says that I have just come in at the domestic airport.
  3. The call centre employee asked me which airline I had come in from. I named the airline, and they then knew which terminal I was at.
  4. Immediately, the call centre employee said: ``Your car is number 9152'' and hung up.
  5. This call was at 00:27 and it lasted all of 37 seconds. (If you don't have a cell phone, there are telephones inside the terminal where this call can be made).
  6. At 00:29 I got an SMS giving me details about the car.
  7. At 00:32 the driver called me and said he's waiting for me.
  8. I stepped out of the terminal and the car was waiting to pick me up, alongside the private cars that had come to pick up other travelers.
It was a very impressive use of technology. Through this, in effect, Meru has comprehensively solved the problem of being denied the 2-bay where taxis would be waiting for customers. Through this, they have successfully routed past the impediment of the breakdown of law and order and contract enforcement in Bombay.

Not yet fully plugged in

These new facilities are not yet properly in place ubiquitously. A few examples:

  • At the Delhi airport, the airport penalises users of Meru with a charge of Rs.80. The Meru arrangement there is not as frictionless as that in Bombay. And, they use the same rigid zone definitions of the traditional pre-paid taxis, which isn't relevant in this new setting.
  • Every Metro station in Delhi should have an associated bay for taxi pickup and dropoff. So far, that hasn't been a part of DMRC's planning.
  • At the international airport in Bombay, there is no access to Meru.

So it seems that a lot has yet to be done to properly integrate taxi services into multi-modal urban transport.


  1. The bangalore airport is way ahead of most of the other airports in this regard. Not only do we have a world class BIAL Volvo bus facility, but at the airport, a passenger is allowed to virtually take any cab he/she wishes to take. This is one airport where you dont end up wasting too much time on logistics.


  2. I second Ravi and BIAL is absolutely a work of art, from both architectural view as well as administrative view.

  3. Delhi metro will probably take 10 years to get to a real grid. Delhi is HUGE. Dwarka, a pretty big suburb, has 20 stations on the metro - and even those are a couple kms apart. But closer to the center - CP for instance - has a 200-400 m distance between stations, or so it seems (I've walked)

    I'm not sure what the zone definitions are that you speak about, in Delhi? THe 80 buck charge is gruesome but I pay it for the comfort, and then I must pay toll charges to Gurgaon and back (Rs. 71).

    The BIAL volvos are incredible. But at the Rs. 125 to 175 per ticket they charge, it's more convenient for a family of four to take a Meru (Rs. 500 or so)

    Are only Merus out in Bombay or Easy Cabs/Other cab services too? I think this hooliganism will destroy the city.

    Also I have heard that Meru and a number of such taxi services actually take All India permits from Delhi, and use that to ply in other cities; see:

    Just wondering if it was the Maharashtra govt. or the All India Tourist Taxi permit that let cab services like Meru flourish...despite the govt. rather than because of it :)

  4. On a related note, about autos in Delhi

  5. Agree with you about the 200m grid. It is important for disabled passengers as well, not to have to go on a wheelchair, or with a stick (or even the non-disabled, but with a pram) for a long distance. Then you need escalators or elevators - I haven't used Delhi Metro, nor Calcutta's, so can't comment.

    The Meru/Bombay airport example is instructive, and your point on the collapse of law and order is well-taken. But a similar racket operates at British airports, too. (I live in London). And there, if you go to the taxi rank, as the queue is called, it is only the black cab that parks there. Those run by the meter, and while the meter isn't tampered, it allows cabbies to take a longer route - or one with heavier traffic, and a £40 trip becomes a $80 trip within 30 minutes, if you are stuck.

    There are "mini-cabs" - usually driven by refugees/asylum seekers, and immigrants. (It is rare to find a non-white or non-male black cab driver in London). Those are now licensed. But you have to call them. The number isn't easy to recall, and there are many companies - so your best option is to have one pre-programmed in your phone. You are in fact better off booking before arrival, since sometimes the waiting period can exceed 30 minutes after you've come out of immigration.

    I recently had to go to northern Connecticut from JFK; the hosts had sent a cab for me. I had to still call them; there was a 30 minute wait in freezing cold. A yellow cab would have cost a bomb, of course, and JFK is not well-served for other public transport. (e.g. not easy to take the subway, go to Grand Central, and then take Metro North or whatever). As usual, the Bombay solution, while not perfect, trumps other, bigger, better-infrastructured cities. Of course, if you live in one of the cities, you can only marvel at choices in other cities. Within the city, Paris Metro and New York Subway beat all other underground systems - in particular London's Underground.

  6. Just taking what Ajay has written about the Meru service. I think meru can go one step further. They can tie up with the airlines, and at the point of issuing boarding pass, the issuer can ask the passenger whether cab is required at arrival destination. This information can be relayed dierctly to Meru and will give 1-2 hr of lead time on average in arranging cabs and also can cope with sudden demand spikes.

  7. I disagree with Salil on JFK. You can take Airtrain, Supershuttle and the cab ride of $45 for any part of the city is not a 'bomb' either. NYC is well covered so is London. Desi in London

  8. Does corrpution has to do anything in this whole issue?
    I see no discussion here or the internet, regarding corruption in Private Sector.

    Is there no corruption in private sector

  9. Just to add on, the pre-paid taxi service at the airport is really good. I feel they charge a lot, almost 30% higher, but its worth the extra amount one pays as its hassle free.

    Neeraj's plan is superb. If Meru could do that, it would be a master piece.

  10. I am not the one to judge but it's funny how everyone (except perhaps Prashant) missed out on the public policy issues involved.

    Prashant mentioned corruption in private sector. I do not know what exactly he meant by it but the whole episode leads me to wonder how we ended up in this state of affairs in this case. What were the decisions taken, by whom and what was involved in those decisions?

    Obviously, the policy makers did not plan ahead to tackle the social and economic dislocation caused by their decision to allow corporation-run taxi services. This theme is repeated in every piece of economic reform in most parts of the world. Arguably, the exact form of dislocations and re-balancing cannot be predicted beforehand. But some of this should have been obvious and tackled early. But in a very indirect way through a mobocracy, the situation was rectified.

    Now, the taxi drivers get to transport passengers who are unaware of the Meru service while Meru gets to serve discerning passengers who are willing to take the trouble of calling up Meru and hiring their cab.

    Smart work by Meru and it shows how the knowledge learnt from setting up call centres to serve American businesses is being leveraged to improve customer service in India (and there are so many similar examples).

    On the other side, working class taxi drivers don't see a huge hit in their earnings.

    What could have been an ideal solution? Perhaps one of these: forcing Meru to buyout existing taxi licences; providing soft-loans for the taxi drivers to improve their taxis and add whatever services they need so that they can compete better; helping the taxi drivers to incorporate or come together as cooperatives.

    Those are solutions for a real world rather than an idealized market economy. Let us build solutions for everyone and think through the consequences for the most vulnerable people among us rather than simply imposing "law and order" on anyone who protests.

  11. >> Providing soft-loans for the taxi drivers to improve their taxis and add whatever services they need so that they can compete better; helping the taxi drivers to incorporate or come together as cooperatives.

    I'd venture that there are unions atleast at present and these options are most likely available to them. Why did they not look into competing better instead of protesting... isn't that a question for them? Imposing law and order (and making it clear to unions that they would have to compete) would have the same outcome as yours?

  12. Neeraj,

    I had a similar idea at one point, but the key idea of Meru is that taxis should be plentifully available at all airports (think Singapore airport) so there is no need to design complex solutions to a scarcity environment.

  13. Anonymous,

    I think it's really useful to not get sentimental about creative destruction.

    The only way a market economy yields good outcomes is for a certain subset of producers to constantly go out of business, to free up labour and capital for better ways to organise production.

    If you try to redesign the world so as to slow down creative destruction, you would be playing God (which is something to be skeptical about) and you'd be slowing down progress.

    To an economist, technical change is about scientific techniques of production, and about scientific business management. Firms like Meru are a big leap, with a small slice of technology (in the old sense of the term) as in GPS, GPRS, etc. and a large slice of technology (in the Economist's sense of the term) as in new ways of organising labour and capital so as to deliver a better customer experience.

    Nobody is saying that black/yellow taxis should NOT ply at the airport. If person X prefers a black/yellow taxi, and if a black/yellow taxi is willing to ply for him, that's an interaction between consenting adults and nobody should interfere with that. But it's just wrong for black/yellow taxis to force Meru out of the airport. That's simply anti-competitive, and requires a pure law and order enforcement response.

  14. I am a big fan of Meru. Disappointed that I can no longer get one from the Taxi Bay at the airport.

    This is the way Indian democracy works. The Kali Peeli cabbies have numbers and a union on their side. They leverage that into anti-competitive behavior. I wrote a piece on the state of Mumbai taxis a few years ago and why old taxis continue to ply (this was before I encountered Meru). The post is here

    The same thing is going to play out in Delhi. Sheila Dixit walked back from taking on the auto wallahs. No surprises there.

  15. There is nothing sentimental about public policy though there's nothing wrong with being a little humane.

    To the anonymous poster who said that outcome will be the same whether the cab drivers are given soft loans or their protests put down by force, yes the outcome will be the same for you but not for those cab drivers.

    It's not easy to simply tell people who are on the edge of poverty to take a hike and compete better. They have families and children in school too. Their lives cannot be simply disrupted without them expecting to respond.

    Implementation of market reforms can be faster by the use of violence. China is a good example. But then, we should be clear that we are following the Chinese model.

    We have economic solutions, technocratic solutions and what not but we need real life solutions and that is where politicians deliver. I think the situation turned out well and India worked again. I just find the nonchalant attitude toward the fate of the poor distasteful.

  16. Creative destruction and rebalancing is very good in the long run or even the short run but people cannot rebalance their lives that quickly. This is a classic problem faced everywhere and getting this right is the hardest. I was alluding to this throughout.

    The use of violence to implement policy led me to wonder about a few things:
    Is it anti-competitive to use one's advantage in access to capital vis-a-vis someone's advantage in skills or experience? What if the one at the receiving end uses his/her advantage in violence to counter the competitor's advantage in access to capital and technology? Who owns the police that has to implement law and order? Whom should the police serve - the working class/numerous cab drivers or the few capitalists/Capital?

    PS: I looked up Meru and kudos to them. I had similar ideas years ago but never got around it. I'm no entrepreneur. Much respect to the managers of Meru.

  17. Anonymous,

    Lets be clear, the cab drivers were the ones committing small scale violence and the police were trying to maintain law and order. How you conclude the opposite - that the changes were being imposed by violence is mind blowing. Not only that, suddenly we are now close to being Chinese? Huh?

    This distortion of facts and weird extrapolations take away objectivity from the discussion.

    FWIW, agree with your central point - looking for better ways for compassionate progress makes a lot of sense.

  18. lukkha, Law is always imposed with threat of violence unless it is unanimously accepted (something that is impossible). I think you misunderstand me. People here want the police to act on their behalf and protect their interests. They weren't asking why the policy failed on at least one front and how it could have been implemented in a better way. I think use of violence is the sign of a system that isn't mature yet. Both the cab drivers and the people here seem to consider violence to be a first solution to any problem.

    We agree on the central point and that's all I wanted to underline.

  19. In response to Desi in London. I think you misread my point about JFK. I had to go to Northern Connecticut, and there was no sensible public transport option from JFK, except using a called limo service, and that took 30+ minutes to arrive, despite being prebooked. JFK served Manhattan well - even with a cab - but other boroughs are not served so well.


  20. Getting Meru or Easycab at Delhi is example of babudom at its best. I walk into their counter asking for cab.One I have to Pay Rs.80 etc second only pre-paid can be booked I told I do not want on fix route cab as there are two of us and one has to be dropped but no you can only book pre-paid upto first location and than use that cab again on normal rate.I demanded why I can just take cab by rate instead of pre-paid. No such option. Even if you can call center they won't book and direct you to pre-paid counter. WoW! What a customer choice!

  21. Hello Ajay, I would agree to your analyis. We need more transperancy in the fare system. Private cab operators should be allowed and this will only get the old seasoned folks raise their bar or just get off...

    One of the methods to bring transperancy and avioud fooling of commuters is to know the estimated fare, before one travels!

    A unique service that calculates your taxi fare and auto fares; before you start your travel! You also get an exact, to the scale Google Map that shows your route. Further, you can also change the default route to avoid traffic, plan for some shopping on the way or just pick up your date! :-)

    A mobile version of the website is also available, so that you can also the refer to the fares while you are seated in a taxi or Auto.

    Hope that this website is useful in empowering the commuters.

    Thank you,
    Swapneel Shah

  22. A new Olacabs taxi provide city taxi service Bangalore using hi tech technology. No need to call call center. You can book your nearest cab online in minute using android or iPhone app.


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