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FARE STRUCTURE PROPOSED FOR BLACK AND YELLOW TAXI
41 Determination of Fare structure for black and yellow taxis in Mumbai.
4.1.1 Asstated in the opening paragraph of the preceding chapter, most of the black
and yellow taxis operate in Mumbai city. All taxis in Mumbai use CNG as fuel.
Hence, we will develop a fare structure for these taxis first. This structure will be
suitably modified for application to taxis elsewhere, whether based on CNG or
petrol or any other fuel
4.2 Costelements.
4.2.1 We have already identified the cost elements that go into consideration for
determination of the fare structure. We will determine the actual cost of
operating a taxi for a unit distance (namely, a kilometer) based on these cost
elements which areas follows:
i. Fixed costs represented by cost of capital and depreciation on the capital
cost of acquiring the taxi;
ii, Other fixed costs such as taxes, insurance premium for comprehensive
policy and other levies and expenses;
Estimated cost of repair and maintenance of the taxi;
iv. Provision for the cost of living of the family of the driver of the taxi;
v. _ Estimated number of revenue earning kilometers run by a taxi during one
working shift.
vi. Average number of kms run on unit quantity of fuel, i.e. in the case of
Mumbai, kms per kg of CNG;
vii. Estimated percentage and actual kilometers of idle run out of the total
distance run bya taxi;
vili. Percentage of taxis which are run ona second shift by a driver different from
the one operating the first shift.
The contribution of each of the above elements to the cost of operating the
taxi are worked outin the following paragraphs.
4.3 Costof(returnon) capital.
4.3.1 Asdiscussed in chapter - 3, with the induction of newer makes and models, the
composition of the taxi fleet in Mumbai is constantly undergoing change. Forexample, the Premier Padmini model which at one time was the dominant
model in the taxi fleet is now almost extinct. On the other hand, Hyundai Santro
which now constitutes almost 50% of the taxi fleet is no more getting added to
the fleet due to stoppage of its manufacturing. 1-10, Wagon-R and Ecco are the
models which are becoming popular. In order to compensate the newer models,
entering the market in terms of cost of capital, it is desirable that it reflects the
current composition of the fleet in terms of the models that are entering or have
entered the market in recent years. From the record of the Regional Transport
Office, Mumbai (East), Ghatkopar and the survey conducted by officers of the
Motor Vehicles Department, it is found that the shares of various models of
black and yellow taxis in the present fleet are: Omni-20%, i10-10%, Wagon R-
10%, Ecco-10% and Santro zing-50%. It may be noted that since models like
Premium Padmini, Beat, Ritz, Indica, Alto have negligible share in the fleet, they
have been ignored for the purpose of calculation of the fleet composition.
Accordingly, the weighted average price of the latest inductions into the
Mumbai taxifleetin terms of their present shares in the fleet in given below:
Sr.No. | Model | % Share one oie
1 Omni 20 3,35,000/- 67,000/-
2 ito 10 5,30,000/- 53,000/-
3 Wagon R 10 5,00,000/- 50,000/-
4 Ecco 10 5,00,000/- 50,000/-
5 SantroZing | 50 4,38,000/- 2,17,500/-
Total(1to5)[ 100 4,37,500/-
Rounded off to 4,40,000/-
*Price includes CNG Fitment, Electronic Fare Meter price, but does not
include Insurance and Tax as it is considered separately.
4.3.2 Asdiscussed in chapter - 3, considering that car loans for taxis are typically given
for 5 to 7 years, we have assumed the higher tenure for the sake of benefit of
such borrowers. Assuming that margin money requirement is 25% , 0.35X is the
share of cost of the car that bears the burden of interest and 0.65X:s the share of
the cost that becomes the investment of the taxi owner where 'x' is the price of
the car. The details of how these shares are arrived at are given in para 3.2.1 of
the previous chapter. Presently, the median rate of interest charged on car loans
by the nationalized banks is 9.00 to 9.50%. We have adopted 9.5% for our
calculation. For the taxi owner's own funds, the rate of interest paid by
nationalized banks on a one-year fixed deposit is, on an average, 6%.
ESAccordingly, the weighted average cost of capital will be (0.35x9.50%) +
(0.65x6%) = 7.225% which can be rounded off to 7.25%. Accordingly, on the
weighted average car price of Rs. 4,40,000/- the cost of capital @7.25% per
annumwill be Rs. 31,900.
4.3.3. For the sake of comparison, details of interest paid on a 7 year bank loan of Rs.
3,30,000 (75% of the cost of taxi) @9.50% on EMI basis and opportunity cost of
own funds @6.00% are given in the following tables.
EMI Schedule for Rs.3,30,000/-for 7 years @ 9.50%
(Figures in Rs.)
SrNo.| Monthly Interest Principal Balance
- 3,30,000
4 5,394 2,613 2,781 3,27,219
2 5,394 2,590 2,803 3,24,416
3 5,394 2,568 2,825, 3,21,591
4 5,394 2,546 2,848 3,18,743,
5 5,394 2,523 2,870 3,15,873,
6 5,394 2,501 2,893 3,12,980
7 5,394 2,478 2,916 3,10,064
8 5,394 2,455 2,939 3,07,126
9 5,394 2,431 2,962 3,04,163,
10 5,394 2,408 2,986 3,01,178
1 5,394 2,384 3,009 2,98,169
12 5,394 2,361 3,033, 2,95,136
13 5,394 2,336 3,087 2,92,079
14 5,394 2,312 3,081 2,88,997
15 5,394 2,288 3,106, 2,85,892
16 5,394 2,263, 3,130 2,82,762
7 5,394 2,239 3,155 2,79,607
18 5,394 2,214 3,180, 2,76,427
19 5,394 2,188 3,205, 2,73,222
20 5,394 2,163 3,231 2,69,991
2a 5,394 2,137 3,256 2,668,735
22 5,394 2,112 3,282 2,63,453