Liberating Local Enterprises: Deregulating E-Rickshaw Industry in Biratnagar

Published by:
Bikalpa-an Alternative
Sarwagya Raj Pandey
May 2017
Liberating Local Enterprises:
Deregulating E-Rickshaw Industry in Biratnagar
Policy Reform Series Vol. 1

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Policy Reform Series
Liberating Local Enterprises:
Deregulating E-Rickshaw Industry in Biratnagar
Sarwagya Raj Pandey
May 2017
Published by
Bikalpa an Alternative

www.bikalpa.net
About the Author
Sarwagya Raj Pandey is a Research officer at Bikalpa-an Alternative.
He writes scripts, blogs and opinion editorial on various topics like
property rights and livelihood issues. He is also a screen writer and
is involved in creating advocacy videos for Bikalpa. He also
coordinates “The Speaker’s Corner” and “Liberty Discussion
Session” which is a platform for young individuals to share their
ideas and discuss on contemporary issues related to public policy
and political economy.

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Acknowledgement
This research, which is a part of ‘Policy Reform Series’, would not
have been possible without inputs from a lot of individuals and
organizations. We would like to begin by expressing our sincere
gratitude towards Atlas Network for granting the resources which
made it possible for us to conduct this follow up research on
Liberating Local Enterprises: Deregulating E-Rickshaw Industry in
Biratnagar.
We would like to thank Mr. Akash Shrestha, Mr. Ashesh Shrestha
and Mr. Prience Shrestha of Samriddhi Foundation for their
valuable support in helping us finalize this research. Without their
consistent support it would have been difficult to come up with this
paper.
We would also like to acknowledge Ms. Laura Liu, Economic and
Trade Policy Advisor at Atlas Network who provided valuable
insights for both the initial and the final draft of this paper.
We would also like to thank Mr. Basanta Adhikari for helping us
collect the primary source of data for the study. We heartily thank
Mr. Suman Rai, Mr. Punam Giri and Mr. Madan Krishna Pradhan for
their tremendous support in helping with the interactions and
logistic requirement during the research.
We are grateful to Mr. Arjun Thapaliya from Biratnagar
Municipality for helping us in acquiring the required documents
and information about e-rickshaws in Biratnagar.
Finally, we would like to extend our sincere gratitude and
acknowledgement to our respondents, city rickshaw drivers, city
rickshaw dealers, city rickshaw union, Department of Transport
Management (Itahari), Traffic Police Office (Biratnagar), and
Biratnagar Sub-Metropolitan for providing their valuable time,
information and insights to the study.
We hope that this paper will lend some insights into the issues
related to city-rickshaw management.

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Disclaimer and conditions of use
The views presented in the paper are the author's and do not represent
the official view of Bikalpa an Alternative. You may use the contents of
this paper for non-commercial purposes such as personal, educational,
and research purposes, provided you cite the paper.
Abbreviations and Acronyms
ASI Avoid Shift Improve
BSC Biratnagar Sub-metropolitan City
CNG Compressed Natural Gas
DoTM Department of Transport Management
e-rickshaws Electric rickshaws
INRs. Indian Rupees
IPT Intermediate Paratransit
MoPIT Ministry of Physical Planning and Infrastructure
NRs. Nepali Rupees
SDGs Sustainable Development Goals
Note: 1 USD = NRs. 102.94 (14 May, 2017)

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About the paper
Liberating Local Enterprises: Deregulating E-Rickshaw Industry in
Biratnagar was conducted by Bikalpa-an Alternative research team
based on the information largely gathered from Nepal in general
and Biratnagar in particular. Our approach ensures that our studies
reflect the actual scenario of the issue of connectivity faced by the
citizens of Biratnagar rather than an outsider’s analysis of the
problem.
Ever since their introduction, three wheeled electric tempos or
rickshaws have overtaken other modes of transportation as the
chief mode of urban transport in many developing nations like
Nepal. These electric vehicles, also popularly known as e-rickshaw,
City Safari, or City rickshaw, have now become the chief paratransit
vehicle in the city of Biratnagar with more than 2200 electric
rickshaws already plying the streets.
Having said that, city rickshaws have been subjected to various
regulatory barriers; for example, the entry barrier imposed by the
local authorities that limited the number of e-rickshaws to 300
when there were already over 1200 of them operating in the city.
After numerous appeals from stakeholders and Bikalpa, Biratnagar
Sub Metropolitan City (BSC) reversed their decision to allow
registration for another 1665 vehicles in May 2016. Since then,
further registrations have been restricted.
E-rickshaws have been largely blamed for the traffic congestion and
even the authorities view it as a huge challenge for traffic
management. With an aim to help Biratnagar achieve Asian
Development Bank’s (ADB) strategy of urban environmental
improvement by 2020 and Sustainable Development Goals (SDGs)
of Industry, Innovation and infrastructures, Decent work and
economic goals, Innovation and infrastructures, Sustainable cities
and Climate actions; e-rickshaws have a very crucial role to play due
to their low carbon footprint and as a means of livelihood.

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However, due to government’s inability to come up with a proper
plan for management of e-rickshaws, there is a rising uncertainty
amongst the e-rickshaw owners about its future prospects. They
have been projected as a reason for traffic congestion rather than
being looked upon as a new and popular mode of transportation in
Biratnagar. There is lack of commitment from the authorities to
improve the current scenario. Often time, this negligence from the
local authorities even subjects the e-rickshaw drivers to public
harassments; for example, unavailability of parking stands for e-
rickshaws forces drivers to park at non-designated spots, which
makes them subject to harassment by the traffic police.
Various e-rickshaw unions, usually affiliated to political
organizations have been formed with a primary aim to protect the
interests of the e-rickshaw drivers given the void created by
absence of a clear legal framework. These unions have been at
loggerheads with the authorities over the management of the e-
rickshaws. Such a scenario can potentially have huge repercussions
for the independent and other aspiring rickshaw entrepreneur.
With entry barrier in place, the remaining players could collude and
this could result into another transportation syndicate being
formed in the urban paratransit system of BSC.
For Liberating Local Enterprises: Deregulating E-Rickshaw Industry
in Biratnagar, the research team employed their past experiences
of interaction with the community members, government officials
and dealers from previous studies. This helped the research team
identify and understand the underlying issues of electric rickshaws
in Biratnagar, recognise their importance in the urban
transportation scenario, and the challenges posed by the
authorities to these e-rickshaw owners. The team also reviewed
various literatures from around the globe on similar transportation
providers.

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To avail local knowledge, core members from Bikalpa an
Alternative arranged various meetings with the stakeholders,
namely the rickshaw operators, Chief District Officer, Officers of
Biratnagar Municipality, Traffic Officer and city rickshaw unions in
order to learn from them about the issues. Snowball sampling
method was employed in interviewing individuals to further
explore the issues. After understanding the core issues, the core
team also conducted interviews and meetings with the policy
makers and authorities to learn about the future preparations in
dealing with the issues. Apart from this, the researchers also
communicated with the passengers and drivers from Biratnagar
city as well as from the adjoining areas.
The local information gathered was then cross referenced with the
literatures on e-rickshaw and urban transport management from
various parts of the world. The picture that emerged was then
peer-reviewed by colleagues at Samriddhi Foundation and Bikalpa-
an Alternative. The purpose of this research is to provide a unique
view of how the regulatory hurdles in markets can bring distortion
and give rise to cartel in a nascent urban transportation industry of
Biratnagar and how market based solutions can enable or inhibit
productivity of this sector.
The purpose of this study is to understand the implications of
current policy paralysis of the authorities in regards to the e-
rickshaw industry and urban transportation of Biratnagar. This
research also studies the approaches taken by other countries of
the world to shape up their urban transportation scenario. The
transport cartel or syndicate that has existed in the transportation
industry of the country could spill over to the urban transportation
scenario of Biratnagar if anti-competitive practices are encouraged
among the existing e-rickshaw unions. With the current barrier to
entry policy undertaken by the government, it could lead to
formation of cartels in the e-rickshaw urban transportation system

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of Biratnagar. Therefore, this research argues about why market
driven solutions should be adopted for these demand-driven
paratransit services and how competitive market mechanism could
foster an era of robust expansion of service, also serving as a blue
print for other cities to emulate in the long run.
Introduction
Electric powered vehicles have been on the rise lately with various
hybrid cars and electric scooters on the foray. Similarly, one such
electric powered vehicle popular amongst the masses is the electric
powered three-wheelers, popularly referred as electric rickshaw in
South Asia. These are powered by an electric DC motor. Electric
rickshaws became popular in the Terai region of Nepal since their
very introduction in 2015. One of the main reasons for their
popularity is their use of electricity, a clean form of energy unlike
gasoline that contributes to pollution. They are imported from
India or China, and are available to carry 3-8 passengers depending
upon various models available. They cost anywhere from NRs.
150,000 for base models to more than NRs. 400,000 for high end
models, and on an average, can yield NRs. 1000 a day, making them
a very lucrative means of livelihood for many low-income
generating groups (Anupam, 2016).
The Ministry of Physical Planning and Infrastructure (MoPIT)
directed the Department of Transportation Management (DoTM)
to register these e-rickshaws from their respective zonal office. For
the registration, the e-rickshaws had to acquire a permit from their
respective municipality. The DoTM also limited the speed limit to
25 Kilometre per hour (Kmph) (Republic, March 31, 2014).
Following this, and with a view to check the growing demand of e-
rickshaws in the city, BSC set a quota for e-rickshaws in Biratnagar
to only 300, while there were already more than 1200 e-rickshaws
plying the street. These figures of rickshaws in operation clearly

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suggest that this policy has led to a distortion between the demand
and supply of e-rickshaws, and has adversely affected both
producers and consumers of the e-rickshaw service (Bikalpa, 2015).
However in May 2016, the BSC allowed registration of 1665
additional e-rickshaws after many rounds of debate and
discussions with the concerned stakeholders (Personal
communication with BSC official Mr. Arjun Thapaliya, 2016,
November 13). This effectively signifies the importance of e-
rickshaws as one of the important modes of urban transportation
of Biratnagar. Currently, they serve as a form of personal
transportation, and can be categorized as an intermediate
paratransit system that addresses the last mile connectivity issue.
Paratransit systems have varying definitions from country to
country. In developed countries, they are a demand-responsive
system such as shared-ride system or dial-a-ride system or even
specialized service for differently-abled people in North America
(Mooney, 2008). In developing regions, due to many factors like
population density, low income and unemployment, paratransit
system encompasses a great array of transport modes from
motorized vehicles to manually-operated and even animal-
powered vehicles. Therefore, there are many forms of
intermediate paratransit systems in the developing countries.
Motorized vehicles are currently gaining popularity in this sector
and cater to the demands of up to 50% of the population in many
South Asian cities like Kanpur, Dhaka and Jaipur (Sivaraman, 2015).
Despite their varying definitions, the main feature of paratransit
system is the door-to-door service it provides to commuters;
something that is not offered by other mass rapid transport. It also
acts as a feeder service in most of the metros in developing
countries and as a result is hugely popular and serves as an
indispensable part of urban transportation. It is typically a private
business owned by small scale independent enterprises whereby

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the vehicles are generally rented on a daily basis. The physical
characteristics of the paratransit vehicle also vary widely from
region to region. Its low cost, along with limited public resources
needed to operate it, makes it very attractive prospect for
developing nations (Shimazaki, 1996).
E-rickshaws have become the source of income for more than 2000
individuals and their families in BSC as of 2016 (Personal
communication with Mr. Arjun Thapaliya). On an average, most of
them earn around NRs. 1000 a day. Also, it is the chief source of
income for most of the family (Bikalpa, 2015). For a country like
Nepal, where around 515,000 youths obtained labour permits to
work in foreign countries in 2015, e-rickshaws are a lucrative
opportunity to earn a livelihood without having to seek job aboard
(The Himalayan Times, 2015).
In Biratnagar, these e-rickshaws have overtaken pedal rickshaws as
the primary mode of intermediate paratransit system. However,
the local administration has not been able to devise a proper legal
framework for the operation of these e-rickshaws. Despite MoPIT
having categorized these vehicles under the “Ha” category (i.e.
light motor vehicle category), they are not allowed to ply the
streets like other vehicles. They are also forbidden to use the
highway that bisects the city into two halves which renders it
problematic for them to operate on the roads (Personal Interview
with the Inspector of Biratnagar Traffic Police, August 22, 2016).
Such ambiguous laws have made it increasingly difficult for the
drivers to operate their e-rickshaws. Due to the uncertainty
brought about by the absence of a proper legal frame work, various
e-rickshaw owners and entrepreneurs have formed e-rickshaw
unions affiliated to various political parties in order to protect their
interests. There have been cases where the owners have resorted
to staging sit-in protests at various places for their demands to be
met. The main demands of the protestors are abolishing the route

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permit system, creating electric rickshaw stands, allowing the e-
rickshaws to use the highway for commuting and easing up the
vehicle license procurement (New Shristi Dainik, 2016). The unions
have also threatened to intensify their protests time and again.
Hence, a very uncertain situation prevails as the status quo can
overturn anytime into further protests and demonstration.
The reason behind this is the absence of a clear policy that puts the
consumers at the forefront. Instead of regulating these vehicles,
the authorities could adopt a market-based solution to the current
scenario wherein the e-rickshaw drivers would compete with each
other by bettering their product to cater to the passengers’
demands. This would help in maintaining equilibrium of demand
and supply in the market, and at the same time, promoting further
innovations. This paper aims to envisage such a market-oriented
model for management of these e-rickshaws in the city of
Biratnagar.
From an economic perspective
In 2015, Biratnagar Sub Metropolitan City (BSC) set a limit to the
number of e-rickshaws that could ply the streets of Biratnagar to
300, despite 1200 e-rickshaws already plying the streets. This move
ensured that a willing investor could no longer enter the market
and hence 300 e-rickshaw owners support the entire market. In
2016, the BSC further allowed 1665 e-rickshaws into the market.
Following this, the BSC has indefinitely closed the registration and
sales of any new e-rickshaws.
From an economic perspective, an investor is interested to enter
into a market for many reasons - most importantly profits. Increase
in demand also leads rise in prices of services, which provides
greater incentive for parties to invest in the market. Consumers
favour for a decreasing price while the producers will always be
interested in increase of price. As the prices are set higher, there is

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a decrease in demand and increase in supply. Similarly, lower prices
increase demand and decrease supply. In case of an unregulated
market with no intervention from any agency (government or
association), both producers and consumers compete for the
resources and services available. Overtime, this leads to
emergence of the price, which brings the demand and supply into
balance. This price point is the equilibrium price point. There is
constant interaction between buyers and sellers over time that
leads to emergence of this equilibrium price.
In a competitive market, it is not difficult for any party to enter or
leave. As the demand increases, it causes a chain reaction among
the producers (in this case, the e-rickshaw drivers), which leads to
rise in the price. This provides incentives for the potential investors
to enter the market and increase supply, thus stabilizing the
equilibrium price. Increase in supply has its effects on the market,
and as a result, there is a decrease in price.
If the demand for e-rickshaw service increases, given the supply,
people will be willing to pay more. This willingness of people to pay
more attracts new suppliers into the market. Thus, competition

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among suppliers increases, and they will be willing to give better
services or accept lower prices to attract more consumers towards
themselves.
For a market to work effectively there needs to be an effective flow
of information between the buyers and the sellers. The market
then has the ability to readjust quickly and the excess demand and
supply will be eliminated. In this way, the price will hover around
the equilibrium price. But, with new electric rickshaws barred from
entering the market, there is a constant supply while the demand
increases. Therefore, consumers’ choices are reduced and they are
forced to pay greater price at the same supply level.
Like in case of Biratnagar and most of the transportation sector in
Nepal, market intervention and regulations cause frequent
turbulence in the demand and supply chain since prices have been
set by regulatory authorities without considering the market
dynamics. The controlled pricing mechanism practiced by the
Department of Transportation and Management leads to a
distortion of the market. This leads to decrease in both consumers’
and producers’ surplus. These surpluses are maximum at
equilibrium price point.
Cartel: An overview
In Medieval Europe, the sea faring merchant who had cross border
trades realized the threats posed by the lack of commitment to
safety by the rulers of the trade centres on their private property.
In particular cases, these threats were realized and such
developments discouraged the incentives to trade for foreign
merchant at the detriment of both rulers of the trade centres and
merchants. It was this lack of commitment to safety that led to the
emergence of Merchant Guild in the medieval Europe (Lopez,
1976). The guild was a countervailing force which insured the
commitment of the ruler and ushered an era of growth in trade. It

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laid an institutional foundation for the rapid growth of long
distance trade in Europe which lead to economic growth between
10th and 14th century - the commercial revolution of the Middle
Ages (Lopez, 1976).
The merchants are the small and perfect substitute for one another
in a merchant guild. The cost for operating and maintaining
discipline are borne by the merchants. This organization also
omitted competition amongst different trade centres, and in the
process, imposed various sanctions against its own members. The
merchant guild also empowered the merchants to the extent as to
coercively implement rules to not just shift rents to their favour but
also entail them to privileges like rights to organize, to hold court
and assemblies, to elect their own consul and to participate on
juries when merchants were being tried. The merchant guild
however did not contribute in trade expansion but rather reduced
the trade in goods to increase the relative price of the goods in
absence of any competition. The guild secured the interest of the
merchants in many ways but it also gave the merchants exclusive
rights to control prices.
Over centuries, these guilds were integrated in the political system
and various large political units emerged in place of merchant guild.
The political, military and commercial relations between the rulers
enabled them to commit to the safety of the merchant trading in
their land. After the evolution of modern state system, the security
provided by the guild was already being provided by the State.
However, the merchant guild did not disappear from the scenario.
As they wielded considerable political influence, they became
instrumental in hindering expansion of trade and limiting the
competition in their area.
The German Hansa was an example of political entity, which aimed
to preserve the property rights of German merchants. However,
they were more concerned with profitability than efficiency due to

which they crushed many other traders group who were more
efficient than the existing ones. Therefore, the Merchant Guild,
which facilitated the trade by protecting the rights of the
merchants in the medieval period were transformed into a
monopolistic organization in modern era (Grief, 1994).
The transport syndicate of Nepal shares a similar history where
various guilds that were formed by transport owners to protect
their interest with political support. In the meantime, these unions
ensured barriers for other operators to enter the market and
manipulated them. Currently in Nepal, despite the Supreme
Court’s verdict rendering the Transport syndicate as illegal, the
cartel continues to exist and the government is unable to liberalize
the dilapidated industry (Republica, 2016). This shows the extent
to which the transport cartel holds influence on the authorities and
political leaderships.
The Threat of Cartel is real…
Oligopoly is a kind of market where there are limited players. When
the existing players in the market collude to restrict entry to the
market for other players, they take control over the pricing and the
decision of one affects the pricing mechanism of others. Hence, the
service providers form a cartel with an aim to increase profit and
limit competitions. This leads to a monopoly. In absence of external
competition, the limited players can always distort the market
dynamics for their individual benefit. The profit is jointly maximized
by restricting output and increasing price which can then be
transferred onto the members of the cartel. This is done at the
expense of the consumers.
Bitlingmayer gives two possible economic theories behind cartel.
A cost curve is a graph with production cost as a function of total
quantity produced. It can be combined with the cost curve of other

enterprises to provide more information about them. In a
competitive market, the price that firms are faced with would be
the price at which the marginal cost curve (mc) cuts the average
cost curve (ATC).
A competitive equilibrium ceases to exist if the U-shaped average
cost curve is similar for all enterprises. This will allow the enterprise
to charge their price in order to maximize their profit, as there is
absence of competition. In this way, all enterprise will have same
average cost curve in the long run.

Hence, the price and output would fluctuate from the equilibrium
price output (Viner, 2004 as cited in Grossman, 2004). In such
cases, the market without competitive equilibrium will prompt the
industry players to produce under capacity and demand higher
price than the minimum average cost. Bitlingmayer also argues that
transportation and automobile industries usually follow this trend.
In such practices, the stable equilibrium can be maintained by
allowing an agency to take control of the demand and supply. Such
anti-competitive practices have been practiced for long in Nepal
where the policy of protecting such cartels and regulations have
allowed the syndicates to flourish and is deep rooted in the
transportation sector of Nepal (Nepal, 2015). Some of the motives
behind the transport entrepreneurs joining the cartels as
mentioned in the paper are;
1) Declining average cost: Many administrative works like claiming
insurance, advertisement, monitoring staffers etc. is pooled by the
association, thus bringing down the overall cost for everyone.
2) Collective bargaining in an uncertain environment: Due to
political uncertainty in Nepal, property rights have never been
secured and even the political parties have extorted money from
entrepreneurs. Therefore, these associations empower the
entrepreneurs to increase their bargaining power with the
authorities.
3) Safety net: The entrepreneurs are insured as the members of
the cartel as it provides protection from vandalism and bears the
cost of their losses.
4) Higher return on investment: The return of investment is higher
generally because of the lower cost once inside the association.

Laws that remain ignored
In a landmark verdict, the Supreme Court of Nepal issued a
mandamus order to end the prevailing syndicate system in the
public transportation system (cartel), and ordered the Government
of Nepal to annul provisions and agreements made in the past with
such cartel organizations which helped sustain the anticompetitive
practices in the transportation system (Republica, 2016).
Previously, few transport entrepreneurs had control over the route
permits and did not allow entry to new operators.
Furthermore, the Parliament has already passed two legislations;
Competition Promotion and Market Protection Act, 2006 and
Consumer Protection Act, 1998 that are sufficient to curb any kinds
of anti-competitive practices like syndicate and cartels across all
sectors. Despite the laws, the transportation system in Nepal
continues to be controlled by well-organized syndicate that
dictates the route permits and transportation fare across the
country (Republica, 2016). If it were not for the political support,
these cartels and syndicates could not have survived in the system
for this long provided so many legislations. In August 2010, the
Supreme Court also passed a verdict against the syndicate system
pertaining in the transportation sector of Nepal (The Kathmandu
Post, 2014).
Despite the laws, much of the syndicate still exist in transportation
sector of Nepal. The current policy of BSC to introduce quotas for
electric rickshaws is in itself an anti-competitive practice promoted
by one of the government institutions. This has a potential to spring
up a new transport cartel in the paratransit sector of Biratnagar
with various e-rickshaw unions already in place advocating for the
rights of e-rickshaw drivers. The barrier to entry could encourage
the existing owners to collude with one another. Hence in the same
country, two opposing laws; one that promotes competition and

another that inhibits it, are in practice. The beneficiary
undoubtedly will be the cartel organizations.
Apathetic Government versus Industrious Individuals: Why Open
the Market
The paratransit system has become vital for a country like Nepal
where efficient public transportations are virtually non-existent.
They flourished in markets where there is no penetration of public
buses, private vehicles and airlines. These intermediate paratransit
vehicles like rickshaws, e-rickshaws and tempos link the people of
rural areas as well as smaller townships to the rest of the country,
therefore, referred to as intermediate form of transport. The
operators of these Intermediate paratransit (IPT) systems are the
poor and unemployed people from these rural areas and small
towns (Bikalpa an Alternative, 2015).
The ease of access to licensing and registration can help the market
of IPTs become more efficient by promoting competition. The
flexibility of the system in the initial days has so far allowed
accessibility, through better penetration into the market, while a
market-based pricing system has enabled them to compete by
reducing fares and providing customized offerings (tea stalls on
rickshaws in Itahari, air conditioned rickshaws, etc.) which were
hitherto not prevalent in the transport scenario of the country. The
affordability factor attracted the masses and helped them gain
traction especially in rural areas where other transport systems did
not operate (Republica, 2014).
However, the arbitrary regulatory hurdles created by the state had
debilitating effects on IPT operations across towns. Being operated
by private players, the state often uses its authority to create

barriers for their functioning, such as in the case of e-rickshaws in
Biratnagar. The absence of properly researched and defined rules
for the IPTs like e-rickshaws created a distortion in the market. This
led to drastic consequences like decision to ban new registration of
e-rickshaws, which have ultimately affected the passengers in
Biratnagar and the adjoining villages. Therefore, a market-based
approach, along with researched and clearly drawn out rules can
ensure a wider access to transportation.
Stakeholders:

Some Stories: Successes and Failures
The case of Raju Mandal: From harassment to making a
livelihood.
Mr. Raju Mandal bought an e-rickshaw in 2014. At the
beginning, it took some time to get enough market as many
people were unaware of the e-rickshaws. However, soon he
started to get quick returns on his investment, and by the first 6
months, there was an increase in number of e-rickshaws in the
market. He also noticed an increased in ridership as many
people opted for e-rickshaws over traditional rickshaws. He
claims to have witnessed the transition of e-rickshaws from a
new form of entertainment transport to city rickshaw - the
primary mode of transportation in Biratnagar. However, the
Municipality's decision to limit the number of e-rickshaws to 300
hurt the income of many e-rickshaw drivers like Raju due to
increased policing to track down the unregistered vehicles. They
abstained from using the main routes due to fear of traffic
penalty of NRs. 1000 that had been levied on such unregistered
vehicles. "We had to use inner roads due to fear of traffic
policemen. Few rickshaws were also detained at traffic police
stations for days. One could not simply afford that. The
registered drivers were happily recovering their cost while we
were living in fear. "
However, Raju’s fate changed during the Madhesh agitation of
2015 when during the general strikes and the subsequent
shortage of petroleum products, the e-rickshaws were seen as
the only alternatives. Therefore, all the e-rickshaws were
allowed to run unhindered. "There were no other options. And
soon, every e-rickshaw was allowed to ply the streets. The
authorities had turned a blind eye on us. I was able to recover
the cost of my e-rickshaw in the next 3 months of general strikes.

I think from then onwards, city rickshaws (e-rickshaws) became
the lifeline of this city."
Raju still drives his two-year old e-rickshaw and makes
anywhere between NRs. 1100 to 1500 per day regularly. So far,
he has had to shed off only NRs. 2800 in the name of
maintenance. By May 2016, the Municipality allowed
registration of over 1600 additional e-rickshaws. Raju, among
many other drivers, got their e-rickshaws registered. "After the
registration, my income has increased remarkably. I am free to
cater to the demands of my passengers. However, there are
many other electric rickshaw drivers who still have to hide from
the authorities. The traffic authorities also impose penalty for
using the highway. Whenever there is traffic congestion, the
authorities turn their ire to us and unjustifiably impose penalty
on us. Apart from that, this is a lucrative market for me.”
The Case Manoj Kumar: Learning from the Market.
Mr Manoj Kumar drives a battered 3 - year old e-rickshaw. One
of the first to get registered, he was among the pioneers in the
field. “It is just three years old but it looks really old. I have ridden
this e-rickshaw in every nook and corner of the city as well as in
various parts of Morang district.” He cited bad roads as the main
reason behind the shabby state of his e-rickshaws.
Manoj identified the market potential of e-rickshaws in early
days and therefore secured his registration in time. Hailing from
an agrarian family, Manoj settled for e-rickshaw after trying his
hands in various other businesses. It is his chief means of
earning now. “I never had any issue recovering the cost. Some of
the busiest routes are the Jogbani border routes. But there is a
lot of competition there these days. Therefore, I have opted for
quieter routes in the villages. There is good money there too. But

there are other people who could not get their vehicles
registered, and they are still suffering. However even they are
making good money by driving in the inner parts of the city by
evading the authorities.”
Manoj has had to invest some money for the maintenance but
he claims that there are better e-rickshaws available at the same
cost nowadays. The main component of expense is the battery
which costs somewhere between NRs. 50,000 to NRs. 75000.
“Initially the battery had cost me NRs. 75,000 when I first bought
the city rickshaw. I had to replace it in 2015 and it cost me NRs.
64,000 then. Nowadays the batteries with higher quality and
capacity are available for just over NRs. 50,000.”
He believes that the efficiency of the e-rickshaws has grown and
there is an increase in income for the newer e-rickshaw owners.
But he believes that the market is coming to a saturation point.
“I had planned to purchase another e-rickshaw and lease it to
my brother-in-law. But looking at the current market the profit
margins are dipping and it is not as lucrative as it used to be. It
does not make much economic sense to buy an e-rickshaw.
Especially the increasingly temperamental attitude of the
authorities to curb on the e-rickshaws is another factor why I
decided against it. There is a future, but not as lucrative as
before. Also, I do not have much faith in the municipality.”
Learning from International Experience
Intermediate public transport or paratransit system is a huge
challenge in growing urban areas. Mumbai’s experience with
Compressed Natural Gas (CNG)-operated rickshaws is one of the
prime examples.

The CNG powered rickshaws are the chief means of door-to-door
transportation and act as feeder to other mass rapid systems. It is
an integral form of transport in Mumbai. It is important to look at
it from the perspective of passengers, drivers and the Government
as a sustainable urban transport system. The e-rickshaw, like the
CNG powered rickshaws, can be handy in pursuing Avoid-Shift-
Improve (ASI) frame work to promote sustainable urban transport.
The strategies include: avoiding unnecessary trips, shifting to a
more sustainable transport mode such as non-motorized
transport, and improving performance in all modes.
The Maharastra State Motor Vehicles Act had authorized the State
Motor Vehicle Department to limit the number of contract
carriages including auto rickshaws. The legal fee for an auto
rickshaw permit is listed as IRs. 100, but the survey on 198 drivers
showed that except for 4 drivers, the remaining paid anywhere
between IRs. 40000 to 90,000 with an average of IRs. 67,908 for a
five-year lease (Shlaes, 2013). This amount is over 600 times the
legal price thus making it cost prohibitive. These data go on to show
that such barriers to entry leave behind many loopholes for
exploitation of drivers. Many permit holders also pass down their
permit to other members of the family or lease it to other drivers
on a daily basis even though such provisions are deemed illegal.
Such extortion on permits can have repercussions in the market
like over pricing for service and cartel formation (Shlaes, 2013).
Similar practices could be emulated by e-rickshaw market in
Biratnagar.
Another example is the management of the cab industry in the
emerging towns of US during 1980s. The entry restriction for taxi
firms in the US in order to regulate the taxi industry has been
argued to have been ineffective. The Chicago example in the Kitch
report (Kitch, 1972) found that even if the entry barrier reduces the
cost of law enforcement and management, the resulting benefits

would be less compared to the efficiency costs due to restriction of
taxis in the industry. The benefits of this increase in service due to
competition in open market would exceed that of the closed
system. A more effective restricted entry system could be achieved
by mandating the electric rickshaws to forfeit their registration in
the event of violation of traffic regulations. Such restrictions would
reduce the fleet of electric rickshaws. In their study of cities in
England, Coe and Jackson (1972) found that only one district
among the six that had no entry barriers supported the hypothesis
that lack of entry barriers would lead to a lack of cabs at non -peak
periods.
Certain Regulations can increase efficiency due to imperfection in
the market; minimum standard affecting the quality of the service,
vehicle safety and insurance coverage. But restriction on entry,
minimum fare controls and restriction on ridesharing would rather
decrease than increase efficiency (Palmer, 1983). However, the
regulations impose an inefficient uniformity in the market. As there
are various standards of vehicles catering to different sections of
the society, the quality regulations might lead them to provide
homogeneous service which would ensure that everyone gets the
same standard of service in terms of safety (Pautler, 1984).

Recommendations
Paratransit service is demand-driven. Therefore, from the analysis
made in this paper, it is necessary for the authorities to lift the
current barrier on the registration in Biratnagar.
 Allowing only a fixed number of rickshaws will encourage the
existing players to collude and form a cartel which will distort
the dynamics of the market. Therefore, the quantity control
should be relaxed if well-being of the citizens of Biratnagar is to
be secured.
 The long-practiced system of price control should be relaxed as
various studies and experiences in Nepal have proved price
control to be ineffective. In a demand-driven market, price is a
sensitive issue. The consumers and the producers will end up
negotiating the price to sustain the market despite the
intervention from the authorities. The price ceiling will only
discourage the transport entrepreneurs from coming into the
industry as this will mean limiting their profit.
 The route permit system should be removed as it is unfeasible
and cost prohibitive for both the drivers and the consumers.
Such route permits are usually designed for dedicated or mass
rapid transport. The paratransit systems are primarily used as
door-to-door service or as last mile connectivity. The permit
system defeats the purpose of Intermediate Paratransit system
altogether. The obligation to follow the specific routes will
greatly limit the e-rickshaw drivers from plying the high-density
routes and will also increase the cost of transportation for the
consumers.
 The e-rickshaws should be allowed to use the main highways
that run through the city area. As this road bisects the city into

two halves, all the important junctions and markets cut through
this area. Therefore, it is not possible to ferry passengers
without using this highway. Furthermore, it greatly reduces the
travel time. Since this highway runs through the most
important market, this is a part of the city road and should be
allowed to be used by commuter transports like these IPTs.
 BSC should focus more on providing designated spots for
parking of e-rickshaws as their popularity continues to grow.
The emission-free vehicles like these will be instrumental in
helping Biratnagar achieve its goal of becoming a green city. As
the city expands, this fleet of e-rickshaws will increase and it is
imperative to have designated parking slots for such vehicles in
the long run to avoid traffic congestions.
 The traffic police should emphasize on the security of the
vehicle. Strong monitoring of the safety standards must be
maintained. The e-rickshaws, depending on their build and
condition of the road, can last anywhere from 4-6 years.
Therefore, with such short operational history, it is important
to constantly monitor the build of the rickshaws and to design
new safety measures to be adhered by every e-rickshaw.
 With proper management and promotion to the electric
vehicles like e-rickshaws, the Municipality can enhance its
Green City initiative and can achieve the Sustainable
Development Goal (SDGs) of Industry, Innovation and
infrastructures, Decent work and economic goals, Innovation
and infrastructures, Sustainable cities and Climate actions by
becoming a Sustainable city with low carbon emission. With
Nepal having huge untapped hydropower potential, and new
improved electric vehicles being launched in the market, BSC

can also start an initiative to make Biratnagar an e-city i.e.
whose transportation is electricity driven.
 Finally, e-rickshaws are currently a means of livelihood for over
2000 individuals in Biratnagar and estimated to be more than
50,000 across Nepal. It has the potential to become a chief
source of livelihood and could also become an alternative
choice for millions of Nepalis aspiring to work as migrant
labours aboard.

Reference
Anupam, B. (2016, Jan 1-7). City Safari on Rickshaw: Nepali
Times.Retrieved from:
http://nepalitimes.com/article/business/City-safari-in-
rickshaw,2784
Bikalpa an Alternative, (2015). City Rickshaw Barrier to Entry:
Biratnagar. Bikalpa an Alternative, Nepal
Greif, A., Milgrom, P., & Weingast, B. R. (1994). Coordination,
commitment, and enforcement: The case of the merchant
guild:Journal of political economy, 745-776.
Grossman, P. Z. (Ed.). (2004). How cartels endure and how they fail:
studies of industrial collusion: Edward Elgar Publishing.
Kitch, E.W. (1972). The Yellow Cab Antitrust Case: Journal of Law
and Economics 15(2), 327- 336.
Lopez, R. S. (1976). The commercial revolution of the Middle Ages,
950-1350. Cambridge University Press.
Mooney, D., & Dupes, B. (2008). Paratransit Services: Retrieved
from http://www.amputee-
coalition.org/fact_sheets/paratransit.html
Nepal, A. (2015). Regulating Reforms in Transportation Services:
Samriddhi, The Prosperity Foundation, Nepal.
New Shristi Dainik (2016, August 7). City Safari protest continues (in
Nepali): New Shristi Dainik, 03. Year 8, Vol 22. Biratnagar.
Palmer, J. P. (1983). Municipal Transportation Regulation: Cartage
and Taxicabs: Ontario Economic Council, Toronto.
Pautler, P. A., & Frankena, M. W. (1984). An Economic Analysis of
Taxicab Regulation: Bureau of Economics Staff Report.

Republica. (2014, April 1). Govt to allow electric rickshaws in urban
centers: Republica. Retrieved from:
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news_ id=71965#sthash.jsDyV5Ed.dpuf
Republica. (2016, August 20). Transport cartels, syndicates flourish
due to political backing: Republica. Retrieved from:
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Shlaes, E., & Mani, A. (2013). A Case Study of the Auto-rickshaw
Sector in Mumbai. EMBARQ India.
Shimazaki, T., & Rahman, M. (1996). Physical characteristics of
paratransit in developing countries of Asia. Journal of advanced
transportation, 30(2), 5-24
Sivaraman, M. (2015). Intermediate Para-transit (IPT) systems: A
case of private players in a sector of government monopoly: Centre
for Public Policy Research, India.
The Himalayan Times. (2015, July 18). Number of migrants leaving
for foreign jobs on the decline: The Himalayan Times. Retrieved
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migrants-leaving-for-foreign-jobs-on-the-decline/
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syndicate exists: The Kathmandu Post. Retrieved from:
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govt-why-syndicate-exists.html
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University of Pennsylvania, Philadelphia, PA, USA.

Mahendra Margh, House no 4, Mahendra Chowk, Biratnagar-15,
Morang, Nepal
Email: bikalpabrt@gmail.com
Website: www.bikalpa.net
Bikalpa-an Alternative is a public policy think tank, working on a
grassroots seeks to develop the culture that favors individual and
economic freedom in spears of personal life and policy issues. It
strives to do so through research, education and civic
engagements.
Vision: Bikalpa- an Alternative envisions a Nepal where rule of law
is supreme and citizens can exercise their natural rights to life,
liberty and property in a free and prosperous society.
Mission: To ensure the natural rights of the citizens, spread the
idea of individual and economic freedom through research,
education and public engagement to create a free and prosperous
society.
/bikalpaanalternative /bikalpabrt /bikalpaanalternative
/bikalpaanalternative

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