The situation is familiar to most Delhites: it’s rush hour and you’re looking for an auto. But they all speed past with their passengers. "This city needs more autos", you mutter to yourself, "surely there’s a demand for them". You may be right, but the number of autos in Delhi is not determined by simple supply and demand, nor is it set according to contemporary needs. Rather, Delhi’s autos are capped at 1997 levels.

This cap creates huge problems for drivers and passengers alike. Lifting this out-dated, nonsensical and anti-entrepreneurial policy would benefit passengers as much as drivers.

In 1997 the Supreme Court instructed the Transport Department to stop issuing new permits for autos in Delhi. Air pollution was becoming a big problem in the city and autos, with their dirty petrol driven two-stroke engines which had changed little since the 1950s, were big contributors. The number of autos would not increase, the court ruled, until a cleaner alternative to the petrol two-stroke could be found.

Despite the shift to CNG in 2001-2 – a clean fuel - the cap remains. Today, if a driver wants to buy an auto, he has to buy an auto and permit package from one of the many auto-financiers who control the black market in permits. The machine is the cheap part – Rs.1.35 lakh for a new CNG fuelled Bajaj four-stroke – but the permit can cost up to Rs.5 lakhs. Getting an auto onto the road costs the same as a new mid-range car.

Auto drivers are from humble backgrounds. They cannot pay up to Rs.6 lakhs up front, so they take high interest loans from the auto-financier. After signing multiple truncated, complex and often blank contracts, they are usually left owing the financier monthly repayments of up to Rs.15000.

With Rs.15000 to repay each month, plus maintenance costs and CNG to buy, there’s little wonder that drivers end up overcharging: going by the meter will not leave them enough money to eat. If the meter rate increases, then so does the permit price.

With the auto-permit package at a heady Rs.6 lakhs, many renter-drivers can only dream of ownership. They are stuck earning Rs.100-200 per day, resigned to handing over half their daily fare money to their malik for the rent one of his ragged and badly maintained vehicles. If the meter rate goes up, the malik simply raises the rent.

So, what effect would removing the cap have?

Issuing new permits freely would reduce their value from Rs.5 lakhs to near zero. Consequently, the cost of an auto-permit package would come down from Rs.6 lakhs to around Rs.1.35 lakhs for the auto and a few thousand rupees more for admin and paperwork.

Auto ownership would change from a distant dream to a very real option for many renter-drivers. There would be more owner-drivers and more autos on the road – something Delhi badly needs as autos are well below 1997 levels even though the city’s population has risen significantly since then.

More autos on the road, means more autos to rent, so rents would also decline.

Lower monthly repayments (considerably less than Rs.15000!) and cheaper rents would ease the financial squeeze on drivers. Lifting the financial burden means there would be less pressure to overcharge passengers. So, the public get an end to overcharging and increasing numbers of owner drivers who take pride in their clean and well maintained autos, which are now their personal assets.

The benefits would be felt far outside Delhi. The majority of Delhi’s auto drivers are migrants, many of whom send money back to their families in rural UP and Bihar. More money in the driver’s pocket means more money for educating his children, healthcare and supporting his family.

Free from their former financial shackles, owner-driver may establish their own legitimate, representative auto unions, rather than be bullied by the many bogus one-man unions, which call strikes and use goondas to enforce them (ever seen an auto with a slashed hood? It’s been damaged for breaking a strike).

It’s easy to see that lifting the cap benefits everyone. Drivers get higher incomes, ownership, pride and increased social mobility for their families. The public get cheaper, cleaner, better maintained autos. Finally, Delhi gets more autos and it gets better autos.

(Read more: http://www.nyayabhoomi.org/autorickshaw-service/auto-finance-mafia).