An analysis of the SocioEconomic aspects of Trishaw (Three Wheeler) market as an Unregulated Public Transport (UPT) mode

Description of the problem and its context:

The market is seen as a profitable investment by local enterprises and individuals. Thus, has created full time and part time jobs. Perceived higher rates in taxies (cabs) mainly hired by high income earners and readily unavailability of taxies are responsible for the emergence of UPTs. UPT sector is often criticized for severe over loading of the vehicle, dangerous driving habits and lack of proper maintenance ( Hilling, 1996)

Description of the problem and its context: Sri Lanka Case

The total number of trishaws in the country is rising at a higher rate. It is evident from the statistics of vehicle registration and import statistics Last year about 361,727 three-wheelers were in operation in the Island From year 2001 there is a sharp increase in registration with 36,204 in 2003, and again 43,789 in 2004.(Department of Motor Traffic)

Description of the problem and its context: Statistics on the total Number of Threewheelers and the growth of Three-wheelers
2001 2002 2003 2004 2005 2006 2007

112,239

133,115

169,319

213,108

254,193

318,659

361,727

Source: Department of Motor Traffic, Sri Lanka

Growth of three-wheelrs in Sri Lanka 2001-2007

400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2001 2002 2003 2004 Years 2005 2006 2007

Number of threewheelers

30% 25%
Growth rate

Growth Rate of three-wheelers in Sri Lanka 2001-2007

20% 15% 10% 5% 0% 2001 2002 2003 2004 Years 2005 2006

Current Scenario in Sri Lanka

Three Wheeler was introduced to Sri Lanka in the mid eighties (Samarasinghe, et al 1999). Since then Three Wheeler has played a vital role in providing transport to many levels of the society. Three wheeler fares have not been regulated Three-wheelers, are been used by many stratum of the society regardless the concern for safety, comfort, and unfair charges

Objectives of the study:

Profile socio-economics of the trishaw market Investigate Key factors given rise to the trishaw market. (Supply side) Investigate economic aspect of the market Present statistics on trishaw market - Growth rate using the data on registration, the import volumes Pricing mechanism of trishaws (Market has theoretically characterized perfect competitive behavior but they exercise monopoly power on passengers)

Objectives of the study:

Investigate social aspect of the market Analyzing the sub-culture arising in the trishaw market Investigate on customer opinion on trishaws (why use trishaw? Purpose) Affordability What drives customer preferences in hiring a Trishaw Customer Satisfaction Social Status Three-Wheeler and city crime/deviant behaviors

Methodology
Sample: Urban sample (non-random sampling) - 200 Three-wheeler drivers - 100 Passengers Location: Western Province Moratuwa Municipal Data Collection Tools: questionnaires, in-depth interviews, focus group methods and participant observation method

Data Analysis

Trishaw Market Structure

Focused on particular locations where operators are collectively sharing a parking place. Close to a cartelized service provision. Some trishaws are registered to a particular park Provides sufficient information regarding their unionized operation with power limited to the particular park.

 It is revealed that 74% of operators interviewed are registered to a particular park while the rest is not registered but still they are in operation.

Consumer Base of Three-wheeler Market

Allows marketers to give different choices to the targeted consumers with discriminated prices Being an unregulated segment of the public transport, identified the passengers based on the frequency of use. 63% of operators responded that most of them are daily users while 22% of operators responded that most of their customers are use the service infrequently.

Market Segment of Trishaw Passengers

2, 1% 4, 2% 1 daily users 2 weekly uses 3 infrequently users 1,3 112, 64% 6, 3% 1,2,3 1,2

15, 8%

40, 22%

Any marketing strategy ?

Promotion of e-business and telex -business is seen in the organized markets Investigated the prevalence of such practices Revealed that 27% of operators give their contact phone numbers to passengers (Justified by the statistics of passengers hiring method using Mobile phones) But 73 % of operators do not practice it Why? it creates an extra journey to pick commuters

Barriers to Entry
Barriers to entry are one of such feature in organized markets (in contestable markets) Investigated on the prevalence of such barriers in an unregulated environment No barriers to enter the market but there are barriers to enter a particular unionized parking place.

Openion on Barriers on entry to trishaw parking place

63, 36%

No 114, 64% Yes

Barriers to enter a parking place

the operator must pay the society a compulsory fee the operator must obtain the membership of the society the influence imposed by other operators The operator must pay to a third person. Among the reason influence from the other operators is significant as per the information provided by the respondents.

Competition in the market

The existence of large number of suppliers restricts producers to earn super normal profit in the long run though it earns profit in the short run. Existence of large number of threewheelers in a particular area may erode the profitability of the operators

 the study investigated the opinion of operators of limiting the number of vehicles of a particular area. 64% of operators is in favor of limiting the number of trishaws the study focused on the drivers operators perceptions on the increasing number of trishaws in the country 68% of respondents implied that importation of trishaws.

Pricing the trishaw service

Determination of price of a commodity in the market is governed by the price mechanism in the free market Due to the non existence of exact supply function, pricing the service is mainly done by the regulatory body if the service is regulated But in the case of unregulated transport modes, the pricing the service is determined by the operator and has the full freedom to charge over consumers Therefore the study focused on how the fare is decided in the market

Deciding the fare of three-wheeler 1 Decided by service the operator

2, 1% 3, 2% 48, 25% 82, 43% 3 Decided by having discussed with the passenger 1,2 2 Decided by the TW society

55, 29%

1,3

Pricing the three-wheeler service

Price of a good or a service is the signaling element to the supplier or the producer in deciding the production decision Trishaw fare, charged independently by operators, therefore researched. Overall it is seen that there is no unique price for the service provided by trishaws and charge passengers at a discriminatory way

Fare charged by the operator for 1 K.m

80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 0 20 40 60 80 100 120 140 160 180 200

fare charged

Number of drivers responded

Fare charged by operator for 2 k.m.

140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 0 20 40 60 80 100 120

Fare charged

Rs.

Number of respondents

Fare charged by operator for 3 k.m.

300 250
Rs. Fare charged

200 150 100 50 0 0 25 50 Number of respondents 75 100

Fare charged by operator for 5 K.m

600 500
Rs. Fare charged

400 300 200 100 0 0 50 100 150 200

Number of respondents

Variation of Three-wheeler fare

The fare tends to vary with the distance with a higher rising trend Operators charge minimum of Rs. 30 to maximum of Rs.56 for the first Kilometer, 1 k.m.

Variation of three-wheeler fare 260.00 240.00 220.00 200.00 180.00 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 0 1

228.93 158.24 81.32 66.03 50.73 128.06 94.76 61.46

fare variation 1

Rs.

87.54
fare variation 2

55.57 42.71 29.85 2

4 k.m.

Fare variation 3

Distance

Conclusions on fare
Fare variation is less for shorter Distance Variation in fare rises with the distance. Since commuters often use threewheelers for short distance they are aware of the fare. But for long distance decision on the fare is solely taken by the operator.

Reasons for Discriminatory fare

42% of operators responded that they raise fare at particular instances

Occassions of occurance of fare raise

6, 5% 11, 10% Night time travel When raining When other trishaws are unavailable When there are more stopping times while travelling 1,4 10, 9% 4, 4% 6 Other

, 15%

63, 57%

Total Revenue and Cost of Threewheeler operation

Total revenue of any producer is important considering a sustained operation Revealed that the daily income of an operator on average is Rs 750. For those operators liable to give a portion of income to the owners of the vehicle, Rs 298 is required to pay for the owner at the end of the day.

Daily Revenue and Expenditure of Trishaw Drivers

2500
Rs. revenue and expenses

2000 1500 Daily Revenue 1000 500 0 0 50 100 Number of respondents 150 200 Daily Expenses

 Total cost component of any production activity along with total revenue explains the profit remaining with the producer. 51% of their income spent on fuel, which is a major component of the operating cost of a trishaw. Other than fuel, service expenses, leasing payment and membership fee are the main cost components of the cost structure.

Distribution of daily earnings on fuel and other expenses

% Average daily earning spent on fuel 49% 51% % on other expenses( services,subsistance,mem ber fee)

Need for a pricing Equation under Regulatory frame work

Thus it is important that formulating a price equation for trishaws incorporating a variable for rising fuel prices may prevent the operators charging excessive fares on commuters. It is beyond the focus on this research

The possibility of regulating Threewheeler Service

Researched on the perceived outcome of future regulation of the operation of trishaws to avoid unfair pricing practices. 74% of operators believe that regulation on operation by registration of the vehicle in a provincial body and issuing a certified identification to the operator will raise the trust of passengers.

 But 26% of respondents oppose the statement with supportive reasoning. - the commuters may not aware of such an identity when they hire - it imposes a burden to the operator in terms of personal security.

 Opinion on exhibiting the fare list on the trishaw as a regulatory measure that will attract passengers was tested. Installation of a meter indicating fare and distance was also tested.

Openion of trishaw drivers on showing a list of fares based on distance

55, 31% Yes No 123, 69%

Openion of trishaw drivers on installing a meterbased on fare and distance

50, 28%

Yes No

129, 72%

Availability of 2 stroke and 4 stroke

11

2 stroke 4 stroke

32, 74%

Conclusions
Service is used as a mode of transport by commuters daily Barriers exists in the market but confine to a particular parking place. There exists a competition in the market Fare is decided by the operator Fare varies with the distance - shorter distance : smaller variations - Longer distance : higher variations

 Raising fare is justified with reasoning Average Total revenue is above Average the total cost thus operation of the threewheelers sustained. But Cost on fuel a variable cost - is significant in the cost structure of threewheelers Operators are in favor of future regulatory measures

Thank You