Responding to the difficulties faced by people in getting a taxi in Beijing, the city's traffic administration issued a notice on Jan 16 warning cabbies that they would be penalized for not operating during peak traffic hours.

The notice, however, does not address the real cause of the problem, that is, the demand of the market.

To begin with, the government has restricted the number of taxis in Beijing to about 66,000 since the early 1990s, during which the capital's population has almost doubled. So one way of easing the problem is to ease the control on the number of cabs in the city. More cabs will increase the competition among cabbies and make it easier for passengers to get a taxi.

Second, taxi drivers who park their cabs during rush hours are neither lazy nor inconsiderate. They take a break during rush hours because they don't want to get stuck in traffic jams and burn fuel and waste time to lose money. About 10,000 drivers suspend their services during peak traffic periods. So unless cabbies get a fair return for their labor even the introduction of new taxis will not make things easy for passengers.

A taxi driver working eight hours a day spends about 6,000 yuan ($852) on gas every month. He/she also pays the taxi company 3,500 yuan a month as lease payment for the cab and license. So he/she has to make at least 40 yuan an hour just to meet the costs.

The average speed of a car during Beijing's peak traffic hours is only 18 kilometers an hour. The taxi fare in Beijing is 2 yuan per km, 10 yuan for the first 3 km and 2 yuan for every 5 minutes of waiting. The maximum a cabbie can make during one hour of traffic jam is about 36 yuan, which means he/she loses at least 4 yuan an hour. The loss would be higher if the cost of burning fuel is factored in.

In the past 20 years, the taxi fare has increased from 1 yuan per km to 2 yuan per km while gas price has increased five-fold. People's income, too, has increased by several times. But the average monthly income of a cabby - 4,000 yuan - has remained almost the same, despite rising commodity prices and inflation over the years.

Therefore, Beijing municipal pricing authorities should consider raising the taxi fare to protect cabbies' interests, and could start the process by seeking public opinion. Apart from raising the fare, they should also consider lowering taxi drivers' lease payment for cabs and licenses.

Low taxi fares benefit passengers. But an artificially controlled taxi fare does more harm than good to the market and makes life unnecessarily difficult for taxi drivers.

Seven big companies have dominated Beijing's taxi business since 2000. A company pays about 70,000 yuan for a Hyundai Elantra, and gets 7,000 yuan a month from two drivers working in shifts after paying their wages and social insurance. Since a taxi can operate for six years before being decommissioned, the two drivers will pay about 500,000 yuan to the company over the six years.

This means the vehicle's cost accounts for only 14 percent of the drivers' lease payment. The rest comprise the company's management costs, profit, and license and other fees. Yet in 2006 the seven big taxi companies jointly announced at a public hearing that their net profit rate was only 1.68 percent that year, which was incredible.

The taxi companies have to be transparent with their costs and profits if they want people to believe their claim. And the municipal government should tell the public exactly how much a company has to pay to get one taxi license. Otherwise, the public will have enough reason to believe that government monopoly is one of the main factors why passengers cannot get a cab when they need one.

Perhaps the government should open the market to free competition to lower taxis' management and administration costs, and ensure that passengers get cabs even during rush hours.

The author is a journalist with China Daily. E-mail: liyang@chinadaily.com.cn

(China Daily 01/19/2013 page5)