Tuesday, February 26, 2013

Business Model of a Rickshaw-Garage

Two and a half months after quitting the ‘job’, I wasn't still fully aware of how this whole Rickshaw-Lending System worked. On what faith does a garage-owner lends his rickshaw, permanently  to a guy who is forced to take up the detested job because he badly needs money to make his both ends meet and yet be confident that he will daily pay the rent and not sell it off and run away with the money. After all, there is no GPS on a rickshaw!

So last week, when I met with the owner of the garage where I rented my first rickshaw – Raja Rickshaw Garage – I decided to satiate my curiosity.

His reply had the flavor of a Management Guru’s discourse sans the jargons, finesse and accent of course! He said that he never lends rickshaw to a complete stranger. The guy needs to be a relative/acquaintance of an existing rickshaw-puller or someone he already knows. Just like Banks, they also work on Referral System. And just like banks ask for guarantor(s) before sanctioning a loan, so do they (though, not always)!

“But I was a complete stranger so why did you lend me a rickshaw?” I interjected. “We kept your Driving Licence as security, didn't we?” he retorted. All I could do was nod!

“But how do you retrieve the rickshaw or recover the cost, if, in the worst case scenario, someone succeeds in duping you?”
“If one runs away with the rickshaw, his guarantor has to pay back.”
As he was unraveling, I was getting even more amazed at how this system works without any legal framework.

“But a rickshaw costs somewhere around 8-9 thousand, how the guarantor will pay that amount when he himself finds it hard to pay back his own rent?”
“We know that, and that’s why he doesn't have to pay in lump-sum. He pays some amount daily, say 40-50 rupees along with his rent. And the amount depends upon the condition of the rickshaw stolen, gaurantor’s economical condition and our mutual understanding. So it’s never the full amount.”
“So how many rickshaws do you lose this way in a year?”
“Around 20-30.” (he was just saying ‘yes-yes’ to any figure I said but said louder yeses to the figure 20-30, so I assume that to be closer approximation!)
“But do you ever recover your stolen rickshaw b'cuz it’s really easy to paint, renovate and then sell it off to a distant garage owner.”
“We do, 50% of the times!”
I was so astonished at his confident reply. Just look at the probability he quoted!

“But how,” I asked like a kid eager to know a magic trick.
“Here comes the role of dalaals or informers.”
Are you kidding me? Informers, in this sector? Well, Carry on. I am all ears.
“These dalaals constantly monitor out rickshaw’s moving around in the area and when they notice our rickshaw plying in some distant place, they alert us.”
“But the rickshaw has been painted and modified!”
Doesn’t matter!!! A dalaal identifies”
(I don’t believe you but go ahead!)

“Also, since we are in the business for so long, almost all the garage owners in the adjoining area and a lot of owners far away know us and when they spot our rickshaw, they inform us. This network builds over time.”
It’s like the Star Alliance in the Aviation sector, where all the major airlines cooperate with each other to minimize losses on logistics and maximize profit.

Talking of Profit, exactly how much does a rickshaw-garage owner earns?
Let’s assume you are a garage owner. Now one rickshaw pays you Rs 50 in a day and if you are an average established Garage owner, your fleet could be as big as 100-200 rickshaws. Which means 5-10K in a day, 1.5-3 Lacs per month or 18-36 lacs per annum. That’s the scale of earning!

Are you suddenly seeing the worthlessness of your MBA degree from IIM? It’s just the beginning of despair because if you are a superstar garage owner, you could very well be sitting over an armada of 700-800 rickshaws. Please do the maths. OK don’t do it. There’s no point making yourself miserable.

Prima facie, a rickshaw garage looks a very lucrative business; so lucrative that you want to take a plunge in it right away. I used to make such off the hand calculations for rickshaw-wallas as well but I only released how tough it is to save even 100 Rupees a day let alone 500 or more. But many of my friends do save that much. As Mr Robert Schuller has rightly said, “tough time never last, but tough people do.”

But undoubtedly, it’s easier to start a rickshaw-garage business these days in Delhi than probably few years back. In Feb 2010, Delhi High Court declared impounding of Cycle-rickshaws by police or Municipal Authorities as illegal and virtually abolishing the need to have a license to pull a rickshaw. This Decision was upheld by the Supreme Court of India in April, 2012.

Earlier lakhs of rickshaws were confiscated every year and released only after extorting bribes; not any longer. “This has meant saving at least Rs.200 crore a year for rickshaw owners,” says Madhu Kishwar, the lady behind the NGO Manushi, which is behind the Court’s verdict.

So from a Garage owner’s perspective, entry barriers have been lowered. Because, if a rickshaw gets impounded, it’s the owner who coughs up the bribe to get it released and in the worst case scenario, if the rickshaw gets scrapped, that’s his loss. Although it depends how mafia-like he is and how much he can put the blame on the rickshaw-puller and extract a part of the moolah lost.

These Garage owners act as 'Banks' and 'lockers' as well for the rickshaw-wallas. My friends used to submit their daily earning with the owner in good faith and ask for it when they needed it. Of course they don’t get any interest on it.

The first time when I stayed at the garage overnight, they advised me to submit my phone at the small grocery shop they run lest it slips out of my pocket while I was sound asleep. I did. The next morning, the son of the garage owner was asking me, “why have you clicked photos of random signboards and who was that girl with you?” Apparently, I forgot to lock my phone!

There is no ledger that they maintain and there is no PHC to audit it. It’s all trust based accounting. Everything is maintained in a seemingly haphazard manner in a dirty notebook but makes perfect sense to them. But it has one drawback. They precisely know how much a rickshaw-walla is earning daily. Probably one of the reasons why they so easily raised the daily rent from Rs 40 to Rs 50!

But probably the toughest part of the business is to deal with rickshaw-wallas because most of them are not very educated and a lot of them are addicted to either hooch or ganja. You have to understand the psychology of your every rickshaw-puller and customize your approach.

You become too lenient with them and they take you for a ride, default on the rent, keep the rickshaw poorly maintained and if you become too strict (or abusive) with them you never know what extreme step they may take – junk or sell off the rickshaw, abuse you back or maybe even hit you. Going in their area to collect daily rent is even more risky for above mentioned reasons.

So if you have enough clout to encroach a road/pavement/govt. land and can arrange a mechanic (which is easy) and possess qualities of a psychologist, a lucrative business is awaiting you. It’s time to be an Entrepreneur!


  1. Amazing blogpost. I work at Centre for civil society in delhi. We did some policy advocacy to remove license raj in d rickshaw sector.
    I was curious to know whether the rule, "rickshaw owner is the puller" law as mentioned in the MCD bylaws has been struck down by courts or whether it is still being enforced albeit by bribes?


  2. Speego Vehicles Co Pvt Ltd, E Rickshaw Manufacturers in Delhi, India
    e rickshaw manufacturers