Politics in India is really a case of more of the same no matter who sits on the chair. Apart from the brief flirtation with liberalization during the Narasimha Rao government, every party and PM has shown that they are okay to tinker with the system but not change it.
With the announcement of fixed prices for cabs in Karnataka, the Congress government has shown that it has not learned anything in the years in they were in the wilderness. In a state where the police do not even have the capacity to ensure people drive on the right side of the road, don’t jump signals, park only in designated locations, the government is now asking the already stretched traffic police department to check what prices cabs are charging and riders are paying.
The daddy-knows-it-all attitude permeates through our political system. It’s like they are telling us, “We trust you to choose the right politician to govern the country, but we don’t trust you to make the right decision with anything else.”
For those of us of a certain age, we still remember the pain of trying to get transportation late at night – after a party, from the railway station, to go to a doctor. But that’s looking at the benefit of ride hailing apps from just one end of the pipe. For drivers of taxis and autorikshaws, these apps created access to a whole new market that they knew existed but had no way to tapping into.
Surge pricing is a communication channel between consumers and suppliers. It isn’t the bad word that it is made out to be.
The price of a taxi ride is not the same to all those who are waiting for the cab. Assuming that the distance is the same for all hailers, the person whose wife is about to deliver will value that ride very differently from the person who is going to watch a movie. The demand for taxis will be very different outside a movie hall at the end of a show from an hour before that.
The cost of driving a taxi isn’t the same for every driver either. For instance, a driver waiting at a location has no incentive to move to another location unless they know that they have a better chance of getting a drive there and that the price of the ride will cover the cost of going to the new location.
By allowing the demand to dictate the price, we allow the market to send signals to producers and service providers. When we put price controls in place, these signals are distorted. In this scenario, services and products never reach where they are needed the most.
When a person hails a cab, it is the beginning of a personal transaction between two individuals. The cab driver and the rider settle on a fair compensation. There is no role for the government in this transaction. By interfering in this essentially private transaction, the government is curtailing the freedom of the common person and distorting the communication between demand and supply.
When looked at from an individual’s level, surge pricing can seem unfair. Why would someone pay two or three times the normal fare? It is also natural that they feel cheated. In India, this feeling is usually followed by the demand for the government to step in and fix the price.
But when looked at from the perspective of someone waiting for a cab where there is none, this can be a very different story.
In Bengaluru alone, 909 people died in road accidents in 2023. Instead of making the streets safer, the government is trying to control taxi fares. Not surprising since the dead don’t vote.
makes a lot of sense