Selling yet another false promise?

– By Akash Shrestha

This article was originally published in The Himalayan Times on 27 September 2015.

Sub-article two of Article 17 of the Constitution of the Federal Democratic Republic of Nepal, 2015 states that every Nepali citizen has a fundamental right to practice any profession, carry out any occupation, or establish and operate any enterprise within Nepal. This freedom to enterprise was also upheld by The Constitution of the Kingdom of Nepal, 1990 and later by the Interim Constitution of Nepal, 2007. But were the citizens of Nepal really free to carry out any profession of their choice? Not quite! The 15-year (and counting) ban on the registration of taxis in Bagmati Zone is a manifestation of the state depriving its people of their constitutionally guaranteed fundamental right to choose an occupation, a profession or an enterprise.


In May 2000, the Department of Transport Management put up a “90-day” halt on the registration of new taxis in the Bagmati Zone on the pretext of carrying out a study about whether the number of taxis (8000, when this decision was made) had surpassed the carrying capacity of the roads. Now 15 years down the line, the decision to halt still persists in the form of a quota limit while the number of taxis have fallen much below the year- 2000 level and the population in the zone has more than doubled. Kathmandu valley alone has a higher population to taxi ratio, and lesser taxis per square kilometer of area, compared to some of the cities with better alternative public transportation services. This ban, and the agreement between the government and the Federation of Nepalese National Transportation Entrepreneurs (FNNTE) requiring the recommendation of the FNNTE to issue service license or route permits to enter the industry, together, have created an almost-impenetrable entry barrier for prospective entrepreneurs that want to enter the industry and make a living by providing transportation service. On top of it all, the government has also exercised price control by setting fares for the taxi service – one that is almost never followed.


The quota (quantity control) means that new players will not be able to enter the industry. That automatically converts the taxi operation licenses into valuable assets. Taxi operators, who were already in the industry before the ban was introduced, now have the opportunity to collude and engage in anticompetitive practices. Today, a taxi license sells for around Rs 900,000 while the registration of other vehicles of similar capacity (car, jeep, van, pick-up and tempo) is only Rs 750 as per the Motor Vehicles and Transport Management Rules, 1997. Used taxis sell for another one million rupees in the market. That makes it around Rs 1.9 million just to enter the industry with a 15-year old third-or-fourth-hand cab, excluding time and money that these prospective entrepreneurs have to spend trying to build ties with the Federation and earning their favour. How often do we hear of ‘access to finance’ as one of the major challenges to micro, small and medium entrepreneurs in Nepal? And how often do we read of young Nepali men and women going to the Middle East or Malaysia in search of jobs and in the hopes of earning a decent living, just to come back a corpse in a coffin? An ‘awful’ lot of times! And yet, here we are, restraining them from enterprising in Nepal itself. Are we forcing them to seek opportunities in hostile environments in some foreign land by denying them their fundamental right of engaging in a profession or an enterprise of their choice in Nepal?


A complete deregulation of the taxi industry will guarantee that people are free to exercise their fundamental right. The Ministry of Physical Infrastructure and Transport (MoPIT) is mulling introducing a fixed number of taxis in the market. But this will still mean that lots of other prospective entrepreneurs cannot enter the industry at will. At this point, I urge readers to keep in mind that not entering a market because one does not see great economic prospects in the market, and not being allowed to enter the market are two very different things. The former is a voluntary action of the individual while the latter is a violation of his/her right due to barriers created by regulations. MoPIT, as the line ministry will then have to mitig ate the opposition that it is likely to face from the existing taxi operators that are benefitting from the existing set-up. Countries like Ireland and New Zealand adopted a zero-compensation policy while deregulating the industry because the privilege (for example, the Rs 900,000 for an otherwise Rs 750 service license in Nepal’s case) that the taxi operators were about to lose were unfair benefits of an unfair policy. However, there were also people that had only recently taken loans and just bought their way into the industry. In cases like these, the MoPIT would have to learn practical lessons from how other countries have deregulated their transportation sectors.


Of course, deregulation of the taxi industry is only a small example of the many economic reforms that are necessary to create a favourable environment for people to enterprise freely in Nepal and become prosperous. The advent of the new constitution does not only signify the federation of the country into autonomous states, and the devolution of the powers of the central government to local bodies. To the citizenry, it signifies new hope and new spirit. People believe that in this new Federal Democratic Republic of Nepal, they will finally find economic opportunities within their homeland. But, will the autonomous states be bold enough to make such strides, or will words like ‘prosperity’ prove to be just another ‘word’ put up on the new constitution to justify the eight years that it took to write the constitution?

The author is Senior Research Officer at Samriddhi, The Prosperity Foundation and can be reached at [email protected]