Modeling Generalized Cost of Travel and Its Application

for Improvement of Taxies in Kolkata

Phani Kumar Chintakayala1 and Bhargab Maitra2
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Abstract: Taxi is an important urban transportation mode, and several initiatives have been taken in recent times for improving the taxi
operation in Indian cities. A major challenge in the process of improving taxies is the older vehicles which are on the road, especially in
megacities such as Kolkata, Mumbai, and Delhi. With growing awareness on the environment and increasing need for improving the taxi
system, policy makers and practitioners are now considering the possibility of replacing age-old vehicles with new ones. The replacement
of old taxies has become a major hurdle mainly because of socioeconomic reasons and the country is in need of a rational approach for
solving the same. Any improvement in taxi 共including replacement of an old vehicle with a new one兲 brings benefit to trip makers and the
perceived benefits are pertinent to improve the planning of taxies. Also, practically no information is available in the literature on the
valuation of taxi attributes by urban trip makers in India. In the present work, the trip makers’ willingness to pay with respect to taxi
attributes is studied taking a case study in Kolkata and the knowledge gained is applied for evaluating various alternatives and identifying
a viable option for replacing old taxies with new ones.
DOI: 10.1061/共ASCE兲0733-9488共2010兲136:1共42兲
CE Database subject headings: Urban areas; India; Taxies; Transportation management.
Author keywords: Taxies; Urban India; Stated choice data; Willingness to pay; Generalized cost.

Introduction 共Luthra 2003兲. Altogether, taxies and autorickshaws have become

India, as a fast growing economy among developing countries, is
experiencing rapid urbanization and significant growth of vehicle
ownership. As a result, traffic congestion and environmental pol-
lution have become the two major concerns in urban India. Vari-
ous issues related to urban transportation problems in Indian cities
and remedial measures have been addressed by several research-
ers 共Singh 2005; Jalihal et al. 2005; Pucher et al. 2005; Jahilal and
Reddy 2006; Maitra and Ghosh 2008兲. Most of the Indian cities
are not developed as planned cities and the road space available is
on a low side. Expansion and improvement of roads in urban
areas are also restricted by physical constraints. Therefore, im-
provement of the public transportation system has emerged as an
instrument for mitigation of traffic congestion and bringing down
the environmental pollution in urban India. Public transport
modes serve more than 40% of transport needs in majority of the
metrocities in India, Kolkata topping the list with 80% 共World
Bank 2002兲. While bus transportation is generally the predomi-
nant public transportation mode in most of the large cities, a
significant share of trips is also catered by paratransit modes such
as taxi and autorickshaw 共motorized triwheeler兲. In small cities,
paratransit modes play a major role in serving the mobility needs
1
Accent Fellow, Institute for Transport Studies, Univ. of Leeds, Leeds
LS2 9JT, U.K. 共corresponding author兲. E-mail: v.p.k.chintakayala@its.
leeds.ac.uk
2
Associate Professor, Dept. of Civil Engineering, Indian Institute
of Technology, Kharagpur 721302, India. E-mail: bhargab@civil.
iitkgp.ernet.in
Note. This manuscript was submitted on June 26, 2008; approved on
October 16, 2009; published online on February 12, 2010. Discussion
period open until August 1, 2010; separate discussions must be submitted
for individual papers. This paper is part of the Journal of Urban Plan-
ning and Development, Vol. 136, No. 1, March 1, 2010. ©ASCE, ISSN
0733-9488/2010/1-42–49/$25.00.
an integral part of the urban transportation system in India. Taxies
also have the potential to be an alternative to private cars and,
therefore, can be instrumental for demand management in urban
areas 共Balakrishnan 2007兲.
Postpaid taxies are most common in India cities. Prepaid tax-
ies are generally available only at major generators such as air-
ports, railway junctions, etc. With the recent efforts on improving
the efficiency of taxi operations, modern radio taxies are also
available now in Delhi, Kolkata, Hyderabad, Ahmedabad, and
many other cities. Overall, the importance of taxies has been re-
alized by various government authorities and initiatives have been
taken toward improving the taxi operation in Indian cities. A
major challenge in the process of improving taxies is the older
vehicles which are on the road, especially in megacities such as
Kolkata, Mumbai, and Delhi. Longer travel time, poor appearance
共both internal and external兲, high noise levels, and high air pollu-
tion are common features of these older taxies. With the frequent
increase in the price of petroleum fuels in the recent past, taxi fare
has increased at regular intervals. However, the older vehicle
fleets continue and, as a result, taxi patronage shows a declining
trend in some cities. With growing awareness on the environment
and increasing need for improving the taxi system, policy makers
and practitioners are now considering the possibility of replacing
old vehicles with new ones, which are faster, attractive, less pol-
luting, and more fuel efficient 共Hindustan Times 2005兲. In fact, in
recent years there have been several incidents of judicial interven-
tions for replacing older vehicles on city roads. For example,
Bombay High Court ruled that 25-year-old taxies will not be al-
lowed to run on the Mumbai roads 共Times of India 2009兲. Out of
55,000 taxies in the city of Mumbai, nearly 7,050 taxies are more
than 25 years old. Calcutta 共Kolkata兲 High Court also banned
vehicles on city roads which are more than 15 years old 共The
Hindu 2009兲. Of the 37,000-odd taxies in the Calcutta Metropoli-
tan Area, comprising the city and parts of the adjacent districts,

42 / JOURNAL OF URBAN PLANNING AND DEVELOPMENT © ASCE / MARCH 2010

J. Urban Plann. Dev., 2010, 136(1): 42-49

 around 7,600 are more than 15 years old 共The Telegraph 2009兲.
The replacement of old taxies has become a major hurdle
mainly because of socioeconomic reasons and the country is in
need of a rational approach for solving the same. Any improve-
ment in taxi 共including replacement of an old vehicle with a new
one兲 brings benefit to trip makers and the perceived benefits are
pertinent to improvement planning of taxies. Also, practically no
information is available in the literature on the valuation of taxi
attributes by urban trip makers in India. In the present work, the
trip makers’ willingness to pay 共WTP兲 with respect to taxi at-
tributes is studied taking a case study in Kolkata, and the knowl-
Downloaded from ascelibrary.org by National Institute of Technology Patna on 10/30/19. Copyright ASCE. For personal use only; all rights reserved.
edge gained is applied for evaluating various alternatives and
identifying a viable option for replacing old taxies with new ones.
It may be mentioned that taxi services are subjected to various
types of regulation such as entry control and fare control. In fact,
the majority of the research works on taxi services have been on
issues related to regulations 共Beesley and Glaister 1983; Frankena
and Pautler 1986; Hackner and Nyberg 1995; Arnott 1996;
Schaller 1999; Yang et al. 2000兲. Different approaches have been
used by researchers for the modeling of demand-supply relation-
ship 共Arnott 1996; Cairns and Liston-Heyes 1996; Xu et al.
1999兲. Network equilibrium problem for taxi services has been
attempted by Yang and Wong 共1998兲, and Wong and Yang 共1998兲.
Golias 共2003兲 studied the impact of taxi traffic on the capacity
and delay at urban road sections. All these works contributed
significantly toward the improvement of taxi services in urban
areas. However, no studies focused on the valuation of the soft
factors of the taxies for inclusion of the same in policies such as
pricing or phasing out the old vehicles. This motivated the writers
to estimate the WTP values for soft factors of the vehicles and
utilize the same in policy evaluation. The knowledge of WTP
values is used to develop generalized cost 共GC兲 as a comprehen-
sive measure of perceived disutility by trip makers. Accordingly,
a reduction in the GC is considered as a measure of user benefits.
Approach
It is a common practice to estimate WTP values by analyzing
the stated preference 共SP兲 data collected from commuters.
Though SP data may be collected in the form of rating, ranking,
and choice, stated choice 共SC兲 experiments provide a framework
for studying the relative marginal disutility of variations in at-
tributes and their potential correlations 共Louviere et al. 2000兲.
SC methods have been used extensively to model the behavior of
individuals 共Hensher and Greene 2001; Hensher 2001; Hensher
and Sullivan 2003; Carlsson et al. 2003; Onyango et al. 2004兲. In
the present work, the SC method is adopted to elicit preferences
by generating hypothetical profiles using various attributes and
their levels.
Generally, SP data are analyzed using traditional multinomial
logit 共MNL兲 models due to their simplicity in estimation. How-
ever, several limitations apply to this model. The most severe of
these is the IIA property resulting from an assumption that error
terms are independent across alternatives, choice sets, and respon-
dents. Second, the coefficients of all attributes are assumed to be
the same for all respondents in a choice experiment, whereas in
reality there may be substantial variability in how people respond
to attributes. Improvements to overcome the limitations of the
MNL model lead to the development of random parameter logit
共RPL兲 models. While the RPL model overcomes the limitations of
MNL models, researchers have also reported higher WTP esti-
mates from RPL models 共Hensher 2001兲. In addition, the variabil-
ity associated with the respondent perception is best captured by
JOURNAL OF URBAN PLANNING AND DEVELOPMENT © ASCE / MARCH 2010 / 43
J. Urban Plann. Dev., 2010, 136(1): 42-49
the RPL. In the present work, SC data are analyzed by developing
both MNL and RPL models.
For the development of RPL models, it is necessary to assume
suitable distributions for random parameters. Different distribu-
tions for random parameters such as normal, lognormal, uniform,
and triangular have been attempted by researchers while develop-
ing RPL models 共Algers et al. 1998; Hensher 2001; Revelt and
Train 1997; Hensher and Greene 2001; Train 2001兲. In the present
work, RPL models are developed assuming constrained triangular
distribution for random parameters.
In SC experiments, it is a common practice to collect repeated
responses from respondents to improve the richness of the data
but this may lead to correlated responses across observations,
which is a violation of the independence of observation assump-
tion in the classical choice model estimation 共Hensher and Green
2001兲. RPL models are developed in the present work, taking into
account the correlations among responses across each individual.
WTP values may also be influenced by one or more socioeco-
nomic attributes such as age, income, household size, etc. The
effect of socioeconomic characteristics on the mean of random
parameter is also investigated with RPL models.
Survey Instrument and Study
The survey instrument was designed to collect the SP “choice”
along with the respondent’s trip characteristics and socioeco-
nomic characteristics. Six attributes were considered for the de-
sign of choice sets. During the preliminary investigation it was
observed that the journey speed was considerably low 共about
10 km/ h兲, the noise level was high, the vehicle appearance was
poor, and most of the taxies were without air conditioner. There-
fore, both quantitative attributes 共i.e., travel speed/travel time and
travel cost兲 and qualitative attributes 共i.e., noise level, vehicle
appearance, presence of air conditioner, and breakdown possibil-
ity兲 were considered for the preparation of alternatives. For the
convenience of the respondents, both travel speed 共in km/h兲 and
equivalent travel time 共min/km兲 were included in the choice sets.
Each attribute was further described by levels. The attributes and
their corresponding levels as used in the study are given below.
• Travel speed 共km/h兲: 25, 20, and 15; corresponding travel time
共min/km兲: 2.4, 3.0, and 4.0 respectively;
• Noise level: low, moderate, and high;
• Vehicle appearance: very good, good, and moderate;
• Breakdown possibility: low and high;
• Travel cost 共INR/km兲: 8.5, 9.5, 10.5, and 11.5; and
• Air condition 共AC兲 available: Yes and No.
Fractional factorial orthogonal main effects only designed by
SPSS 7.5 produced 16 alternatives using all the attributes and
their levels, with an assumption that all interaction effects are
negligible 共Hensher et al. 2005; Louviere et al. 2000兲. To reduce
the confusion and/or fatigue of respondents, these 16 alternatives
were randomly grouped into four blocks, each containing four
hypothetical alternatives. A base alternative 共taxi兲 was also added
to each of these four choice sets. As a result, each choice set
contained five alternatives of which four alternatives were hypo-
thetical 共generated兲 ones and one was the base 共taxi兲 alternative.
Base alternative details were nothing but the details of the last trip
made by the respondent. A fixed experiment approach, where
each respondent faced exactly the same choice sets at exactly
the same stage of the choice task, was adopted for presenting the
choice sets. All the alternatives in a choice set were presented
in the generic form 共i.e., Alternative A, Alternative B, etc.兲. A
 Attribute Base Alt. 1 Alt. 2 Alt. 3 Alt. 4 Table 1. Descriptive Statistics of Some Demographic Variables
Speed (km/h) or Revealed 15 20 20 25
Travel Time(min/km) 4 3 3 2.4
Commuting Noncommuting
Noise Revealed Very low Moderate Low Moderate
Variable trips trips
AC Revealed No No Yes Yes Sample 632 339
Appearance Revealed Moderate Very Good Moderate Very Good
Gender Male 520 共80%兲 282 共85.6%兲
Break down possibility Revealed High High Low Low
Cost (INR/km) 7.5 8.5 9.5 10.5 11.5
Age 共years兲
15–40 446 共70.6%兲 251 共73.6%兲
Choice 41–60 180 共28.5%兲 87 共25.5%兲
⬎60 5 共0.8%兲 3 共0.8%兲
Fig. 1. Sample choice set Personal income INR/month
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⬍10,000 83 共14.5%兲 168 共49.3%兲

sample of SP choice set is presented in Fig. 1. Survey personnel
were trained in multiple sessions to improve the quality of the
work as these interviews were paper and pencil interviews in
nature. Survey personnel were equipped with information to be
incorporated in the SP part of the questionnaire based on the
information provided by the respondents in the first part of the
questionnaire. Along with speed, the corresponding travel time
was also presented by the survey person to improve clarity while
obtaining the choices. Data were collected from taxi users of
Kolkata during October 2004. For wide distribution of sample,
taxi users were intercepted at various work places, shopping cen-
ters, and recreational places spread over the city. Face to face
interviews were carried out and respondents were approached
randomly. Each respondent was requested to provide information
related to the most recent trip, which was fed to the choice set as
a base alternative, and socioeconomic characteristics, and then to
choose an alternative from each of the four choice sets. This not
only gave each respondent an opportunity to evaluate all the 16
alternatives but also enriched the database with more SC obser-
vations 共than the number of respondents兲.
Database
During data collection, the respondents’ recent trip characteristics
such as trip length, cost of recent trip, trip purpose, etc., and
socioeconomic characteristics such as age, occupation, personal
income, family members, household income, and responses to the
choice sets were recorded. Every respondent was asked to make a
choice among five alternatives presented in a choice set. This was
repeated four times to enable each respondent to evaluate all SP
alternatives and also to enrich the SC data. During data collection,
2,300 people were requested to participate in the survey but only
1,720 people participated. However, for various reasons such as
inconsistency in the responses and incomplete responses, only
971 samples are selected for final analysis.
Summary statistics of the information about trip purposes and
socioeconomic details such as gender, age, and personal income
forming the database for the present work are given in Table 1.
The sample consists of about 80% of male respondents. About
72% of the sample is in the age group of 15 to 40 years, 27%
between 40 and 60 years, and only about 0.8% of the elderly is a
part of our sample. One of the reasons could be that the majority
of the elderly people that travel by car/taxi are accompanied by
their family members so we might have got them in the sample as
part of the group. Moreover, unlike in western countries, the ve-
hicle ownership of elderly people is quite low and the trip making
frequency of elderly people is also very low in Kolkata due to the
“live together” concept of living with son’s or daughter’s families
where the son or the daughter takes care of the needs of the
elderly.
10,000–20,000 249 共44.0%兲 148 共43.4%兲
⬎20,000 209 共41.5%兲 25 共7.3%兲
Trip purpose
Job 396 共63.0%兲 —
Business 235 共37.0%兲 —
Recreation — 207 共60.7%兲
Personal or social — 134 共39.3%兲
Taxi usage
⬍Once in a week 278 共44.2%兲 215 共63.4%兲
1–5 times a week 265 共42.1%兲 106 共31.3%兲
⬎5 times a week 88 共13.6%兲 18 共5.3%兲
Note: INR= Indian Rupee; 44 INR= 1 USD.
Model Development and Results
LIMDEP 8.0 共2005兲 is used for the analysis of SC data using
MNL and RPL models. Three RPL models are developed, namely,
RPL 1—with independent choice sets, RPL 2—assuming correla-
tions among choice sets across each individual, and RPL
3—considering heterogeneity around the mean of random param-
eter. In the case of utility specification of RPL models, Ruud
共1996兲 pointed out that mixed logit models have a tendency to be
unstable when all parameters are allowed to vary. Fixing the cost
parameter resolves this instability. If the cost parameter is allowed
to vary, the distribution of a noncost parameter 共say, time兲 is the
ratio of two distributions, a Cauchy distribution, which has no
finite moments. Therefore, in the present work, travel cost is con-
sidered as nonrandom in the development of RPL models. The
attributes are coded according to their levels. Quantitative at-
tributes travel time and travel cost are entered in cardinal linear
form, i.e., continuous scale 共for example INR 7.5, 8.5, 9.5, 10.5,
and 11.5 for cost兲 while qualitative attributes’ levels are effect
coded 共−1 , 0 , 1兲. In RPL models all the random parameters are
assumed to follow a constrained triangular distribution. RPL mod-
els are estimated with a simulated maximum likelihood using
intelligent Halton draws with 500 replications 共Train 1999兲. Ini-
tially all attributes are considered for model estimation. However,
the attribute “breakdown possibility” and the third level of at-
tribute “vehicle appearance” 共i.e., moderate vehicle兲 are found to
be insignificant. Therefore, models are re-estimated excluding the
insignificant attribute and level 共Hensher et al. 2005兲. Table 2
shows the model results. It may be observed from Table 2 that
signs of the parameter estimates are as expected and in agreement
with the actual conditions. It is evident from the t ratios that the
parameter estimates are statistically significant 共at 95% signifi-
cance level兲. The ␳2 values indicate that these models are good
in fit.
In RPL 3, heterogeneity in the mean of the random parameters
is evaluated using socioeconomic characteristics such as age, in-

44 / JOURNAL OF URBAN PLANNING AND DEVELOPMENT © ASCE / MARCH 2010

J. Urban Plann. Dev., 2010, 136(1): 42-49

 Table 2. MNL and RPL Model Estimates
MNL RPL 1 RPL 2 RPL3
Attribute coefficient coefficient coefficient coefficient
Random parameter
In-vehicle travel time −0.988 共18.59兲 −1.033 共17.48兲 −1.377 共20.13兲 −2.424 共19.27兲
Low noise 0.739 共15.71兲 0.747 共15.22兲 0.843 共17.25兲 0.901 共17.98兲
Moderate noise −0.225 共6.07兲 −0.233 共5.91兲 −0.367 共8.20兲 −0.345 共7.47兲
Air conditioner availability −1.115 共15.23兲 −1.431 共11.54兲 −1.931 共9.88兲 −2.223 共10.29兲
Good vehicle 0.274 共8.01兲 0.281 共8.21兲 0.208 共5.51兲 0.303 共7.58兲
Nonrandom parameters
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Travel cost −1.077 共24.68兲 −1.119 共22.62兲 −1.253 共24.62兲 −1.227 共24.80兲
Random parameter spread
In-vehicle travel time — 1.033 共17.48兲 1.377 共20.13兲 2.424 共19.27兲
Low noise — 0.747 共15.22兲 0.843 共17.25兲 0.901 共17.98兲
Moderate noise — 0.233 共5.91兲 0.367 共8.20兲 0.345 共7.47兲
Air conditioner availability — 1.431 共11.54兲 1.931 共9.88兲 2.223 共10.29兲
Very good vehicle — 0.281 共8.21兲 0.208 共5.51兲 0.303 共7.58兲
Heterogeneity in mean
Travel time: age — — — 0.0337 共9.97兲
Observations 3,884 3,884 3,884 3,884
Log likelihood −4,142.18 −4,145.02 −4,030.19 −3,962.87
␳2 0.2502 0.2497 0.2704 0.2826
Note: t values are in parentheses.

come, etc. It is found that age is the only variable which has a erate noise” is valued negatively in the range of INR 0.21 to INR
statistically significant decomposition effect 共at 95% confidence 0.29/ km across MNL and RPL model specifications, and the level
level兲 on the mean of in-vehicle travel time. The positive sign of “high noise” is valued between INR 0.88 and INR 1.01. Similarly,
the parameter indicates that with the increase in age, the WTP MNL and RPL estimates show that the “very good vehicle” is
decreases. valued positively between INR 0.17 and INR 0.25/ km. An inter-
The interpretation of model coefficients is not straightforward esting finding is that the attribute “air conditioner presence” is
except for significance. Therefore, the marginal rates of substitu- valued negatively in the range of INR 1.04 to INR 1.81/ km. The
tion between the attributes and cost are calculated. These ratios fare differential of taxies with and without AC may be a cause for
can be interpreted as marginal WTP for a change in each attribute this as there was a new call taxi system launched during the
under consideration. With a fixed cost coefficient and triangularly survey which has air conditioned vehicles and charges at INR 2.5
distributed attributes, marginal WTP is also triangularly distrib- more than the normal nonair conditioned taxi. This might have
uted. The marginal WTP estimates for various attributes from lead to a kind of preassumption that AC would cost more, which
MNL and RPL models are shown in Table 3. is also true, and as a result people might have chosen alternatives
It may be observed from Table 3 that the WTP values for the with no AC. An in-depth investigation into the data also revealed
in-vehicle travel time are INR 0.92/ min 共 ⬇ INR 55.2/ h兲, INR that majority of the people gave a low preference rank to air
0.92/ min 共 ⬇ INR 55.2/ h兲, and INR 1.10/ min 共 ⬇ INR 66.0/ h兲 conditioner when asked to rank the attributes.
from the MNL, RPL 1, and RPL 2 models, respectively. In RPL 3, In general, if all the attributes and their levels are considered,
where the socioeconomic parameter “age” has a statistically shifting from MNL to RPL specifications produced both higher
significant decomposition effect on the mean of in-vehicle and lower WTP estimates. Therefore, no specific trend is ob-
travel time, WTP for in-vehicle travel time is INR 0.99/ min served in WTP estimates produced from MNL and RPL model
共 ⬇ INR 59.4/ h兲 for the sample’s average age of 34 years. In case specifications. Similar observations have been made by other re-
of qualitative attributes and their levels, “low noise” is valued searchers in the context of recreational demand estimation 共Train
positively in the range of INR 0.67 to INR 0.73/ km while “mod- 1998兲, household appliance study 共Revelt and Train 1997兲, mode
choice modeling 共Bhat 1998; Alpizar and Carlsson 2001兲, and
estimation of value of travel time 共Algers et al. 1998; Carlsson
Table 3. WTP Values 1999兲.
WTP 共INRa兲 from
Attribute MNL RPL 1 RPL 2 RPL 3
Accepted Model and GC
In-vehicle travel time 0.92 0.92 1.10 0.99a
Low noise 0.69 0.67 0.67 0.73 For the models reported in Table 4, a direct test to determine
Moderate noise 0.21 0.21 0.29 0.28 whether RPL 1 and RPL 2 statistically represent the data better
Air conditioner availability 1.04 1.28 1.54 1.81 than the MNL model is not possible given the use of constrained
Very good vehicle 0.25 0.25 0.17 0.25 triangular distributions in the estimation of the random param-
a
For people with age greater than 34 years. eters in RPL 1 and RPL 2. This is because the spread parameters

JOURNAL OF URBAN PLANNING AND DEVELOPMENT © ASCE / MARCH 2010 / 45

J. Urban Plann. Dev., 2010, 136(1): 42-49

 Table 4. Log-Likelihood Ratio Test
Chi square
Test LR 共P = 0.01兲 DOF
RPL 3-MNL 358.62 6.64
RPL 3-RPL 1 364.30 6.64
RPL 3-RPL 2 134.64 6.64
of the random parameter distributions are constrained to equal the
means of the distributions, and hence no additional parameters are
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estimated in the RPL 1 and RPL 2 models. As such, any statistical
test will have zero degrees of freedom. The additional interaction
term introduced to uncover mean heterogeneity in RPL 3, how-
ever, allows for tests of statistical significance between this model
and the MNL model or other RPL models. The log-likelihood
ratio tests are summarized in Table 4.
It is evident from Table 4 that the RPL 3 model is statistically
superior to the MNL, RPL 1, and RPL 2 models, and also RPL 3
provides a better model fit 共␳2兲. The GC function is, therefore,
developed using the estimates from the accepted model 共RPL 3兲.
In the GC function, the qualitative attribute levels are rescaled
with respect to the most desired level so that the most desired
level holds zero cost and the least desired level holds maximum
cost to the user. Then the GC becomes
GC = 0.99*IVTT + 共␣ + ␤ + ␥兲*d + F
where IVTT⫽in-vehicle travel time in minutes; ␣ = 0 when NL is
low noise; ␣ = 1.01 when NL is moderate noise; ␣ = 1.18 when NL
is high noise; ␤ = 0 when AC is air conditioner absence; ␤ = −3.6
when AC is air conditioner presence; ␥ = 0 when VA is very good
vehicle; ␥ = 0.50 when VA is good vehicle; F = direct cost of travel
共in Rupees兲 expressed as F = 18 if d 艋 2 and F = 18+ 9*共d − 2兲 if
d ⬎ 2; d = travel distance in kilometers.
Replacement Alternatives and Their Evaluation
Several alternatives are formulated and evaluated in order to iden-
tify a viable option for replacing old taxies with new ones. Dif-
ferent aspects of the work are discussed below.
Operating Cost
The present fare structure is a minimum of INR 18 up to 2 km
and then increases at the rate of INR 9 / km. On an average, a taxi
runs 90 km/ day of which 65 km are passenger kilometers that
generate a revenue of INR 585.00. The expenses in the form of
fuel cost, maintenance cost, etc., as obtained from preliminary
investigations are given in Table 5.
GC Savings and User Charges
In the present day scenario, for an average taxi characterized by
high noise level, moderate condition, no air conditioner, average
travel time of about 5 min/ km, and fare of INR 9 / km, the GC per
kilometer travel is estimated as INR 15.64. However, if new ve-
hicles are introduced, the average characteristics are expected to
be of low noise level, good vehicle, and travel time of about
4 min/ km. For such taxies, the GC at the current fare structure
would be INR 12.96/ km indicating a GC savings of about INR
2.7/ km.
46 / JOURNAL OF URBAN PLANNING AND DEVELOPMENT © ASCE / MARCH 2010
J. Urban Plann. Dev., 2010, 136(1): 42-49
Table 5. Vehicle Operating Costs for a Taxi
Amount
Items 共INR兲a
1 Road tax per year 4,000
1 Permit for 5 years 5,000
1 Registration 3,000
Mobil 6,000
Tires per year 4,200
Fitness certificate after 2 years every year 4,000
Fuel cost 共per year兲 100,500
a
INR= Indian Rupee; 44 INR= 1 USD.
It is a common practice to charge users an additional amount
when they are provided with better transport facilities. The addi-
tional amount should be a fraction of the savings that the users get
from the improved facility. However, there are no clear evidences
as to what extent the savings can be used for charging. With the
use of about 25% of savings for cars and 60% of savings for
trucks as toll for Mumbai-Pune expressway in India 共http://
www.highwayfinindia.org/pr_instruments2.htm兲, it is assumed to
use a maximum of 40% of the GC savings for charging taxi users
in lieu of the improvement of the taxi system, if necessary. It is a
common practice in India to increase the fare of taxies in mul-
tiples of INR 0.5. Therefore, in the present study, the fare incre-
ments are taken as INR 0.5 and INR 1.0 representing 18.5 and
37% of GC savings respectively for carrying out the analysis.
Evaluation of Alternatives
The costs involved in bringing a new vehicle on road include the
price of the vehicle, registration cost, insurance costs, etc. For
evaluating alternative schemes, the price of the new vehicle is
taken as INR 313,979 for the most commonly used vehicle as
taxi. The new vehicle is assumed to be purchased with loan as-
sistance from financial institutions. It is assumed that an amount
of INR 25,000 is likely to be received by selling off an old ve-
hicle. This amount may be utilized for meeting the day one ex-
penses toward the first equal monthly installment 共EMI兲,
registration, insurance, road tax, etc.
The two repayment schemes, for clearing the loan amount
taken to purchase a new vehicle to replace the old vehicle, are
assumed as 5 and 7 years. Analysis is carried out with capital
cost, vehicle insurance, EMI, and other operating expenses
needed to be borne by the operator against the generated revenue
and minimum yearly profit to the operator. Operating expenses
include fuel cost, maintenance cost, etc. Fuel cost is estimated
with an assumption that the fuel efficiency of the new vehicle is
about 14 km/ L of fuel against 12 km/ L for the old vehicle.
Maintenance cost is assumed to be nil during the first 2 years of
operation, INR 6,000 in the third year, and increases at the rate
of INR 6,000 for every 2 years until the eighth year and then by
INR 12,000 in the ninth year for 2 years. Several alternatives
are formulated in order to identify a viable option for vehicle
replacement.
Items 7 years 5 years
Interest rate, 9% 共margin money兲
Repayment period 共months兲 84 60
EMI 共INR兲 5,067 6,533
EYI 共INR兲 60,804 78,396
 Table 6. Repayment Options at Increased Fare of INR 9.5/ km
Discounted present Average discounted present
Repayment profit 共INR兲 profit 共INR兲
period Total cost Total income Net profit
共years兲 共INR兲 共INR兲 共INR兲 at 10% discount rate
7-year plan
1 170,089 222,300 52,211 52,211 52,211
2 164,665 222,300 57,635 52,396 52,303
3 173,582 222,300 48,718 40,263 48,290
4 172,500 222,300 49,800 37,416 45,571
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5 176,552 222,300 45,748 31,246 42,706

6 176,442 222,300 45,858 28,474 40,334
7 175,333 222,300 46,967 26,512 38,360
8 119,600 222,300 102,700 52,701 40,152
9 119,600 222,300 102,700 47,910 41,014
10 139,486 222,300 96,700 41,010 41,014
5-year plan
1 187,681 222,300 34,619 34,619 34,619
2 182,257 222,300 40,043 36,403 35,511
3 191,174 222,300 31,126 25,724 32,249
4 190,092 222,300 32,208 24,199 30,236
5 189,144 222,300 33,156 22,646 28,718
6 118,600 222,300 103,700 64,390 34,663
7 113,600 222,300 108,700 61,358 38,477
8 119,600 222,300 102,700 52,701 40,255
9 119,600 222,300 102,700 47,910 41,106
10 139,486 222,300 96,700 41,010 41,096
Note: INR= Indian Rupee; 44 INR= 1 USD.

• Alternative 1: fare as INR 9 / km 共i.e., present fare兲 with 5-year
repayment plan;
• Alternative 2: fare as INR 9 / km 共i.e., present fare兲 with 7-year
repayment plan;
• Alternative 3: fare as INR 9.5/ km 共i.e., present fare+ INR
0.5/ km as additional user charges兲 with 7-year repayment
plan;
• Alternative 4: fare as INR 9.5/ km 共i.e., present fare+ INR
0.5/ km as additional user charges兲 with 5-year repayment
plan;
• Alternative 5: fare as INR 10/ km 共i.e., present fare+ INR
1.0/ km as additional user charges兲 with 7-year repayment
plan; and
• Alternative 6: fare as INR 10/ km 共i.e., present fare+ INR
1.0/ km as additional user charges兲 with 5-year repayment
plan.
The minimum income required for the operator is assumed as
INR 3,500/ month which is equivalent to INR 42,000/ year. While
analyzing the alternatives, it is aimed at assuring a discounted 共at
10% discount rate兲 average minimum yearly income of around
INR 42,000. A replacement scheme is assumed to be viable if the
average discounted present profit at the end of any year, in the
10-year span, is around INR 42,000. Details of the analysis of
Alternatives 3 and 4 are shown in Table 6 and Alternatives 5 and
6 are shown in Table 7. The item total cost includes the EYI,
insurance, road tax, route permit cost, registration, fuel cost, and
maintenance cost. The item total income is the revenue that is
generated in a year. Net profit is the difference between the total
income and total cost, while the discounted present profit is the
present profit discounted at 10% discount rate, and the average
discounted present profit in any year is the average of discounted
present profits until that year. It is observed from the analysis that
replacement of old taxies with new ones becomes a viable option
if the fare is increased by INR 1 / km, which is equivalent to 37%
of the GC savings.
Conclusions
An approach is demonstrated in the present work for evaluating
alternatives and identifying a viable option for replacement of old
taxies with new ones, with regard to user benefits as well as fixed
and variable costs associated with taxies in Kolkata. Among vari-
ous alternatives evaluated in the present work, the one with an
increase in fare by INR 1 / km with 7-year repayment plan is
found viable and superior to other alternatives. It is interesting to
note that an increase in fare by INR 1 / km is equivalent to 37% of
the GC savings likely to be derived by the replacement of a typi-
cal age-old taxi with a new one. The work highlights the need for
carrying out valuation of relevant attributes and relating the in-
crease in fare level with the trip makers’ perceived benefits result-
ing from an improvement plan. Six alternatives analyzed in the
present work include three fare levels and two repayment plans.
Fare level and repayment plan are the two policy variables evalu-
ated in the present work in the context of replacement of old
taxies with new ones. The approach demonstrated can be instru-
mental for formulating more alternatives and evaluating policy
issues related to providing subsidy for the replacement of old
vehicles, increase in taxi fare due to the increase in fuel cost, etc.

JOURNAL OF URBAN PLANNING AND DEVELOPMENT © ASCE / MARCH 2010 / 47

J. Urban Plann. Dev., 2010, 136(1): 42-49

 Table 7. Repayment Options at Increased Fare of INR 10/ km
Discounted present Average discounted present
Repayment profit 共INR兲 profit 共INR兲
period Total cost Total income Net profit
共years兲 共INR兲 共INR兲 共INR兲 at 10% discount rate
7-year plan
1 170,089 234,000 63,911 63,911 63,911
2 164,665 234,000 69,335 63,032 63,472
3 173,582 234,000 60,418 49,932 58,958
4 172,500 234,000 61,500 46,206 55,770
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5 176,552 234,000 57,448 39,238 52,464

6 176,442 234,000 57,558 35,739 49,676
7 175,333 234,000 58,667 33,116 47,311
8 119,600 234,000 114,400 58,705 48,735
9 119,600 234,000 114,400 53,368 49,250
10 125,600 234,000 108,400 45,972 48,922
5-year plan
1 187,681 234,000 46,319 46,319 46,319
2 182,257 234,000 51,743 47,039 46,679
3 191,174 234,000 42,826 35,393 42,917
4 190,092 234,000 43,908 32,989 40,435
5 189,144 234,000 44,856 30,637 38,476
6 118,600 234,000 115,400 71,654 44,005
7 113,600 234,000 120,400 67,963 47,428
8 119,600 234,000 114,400 58,705 48,838
9 119,600 234,000 114,400 53,368 49,341
10 125,600 234,000 108,400 45,972 49,004
Note: INR= Indian Rupee; 44 INR= 1 USD.

It is also possible to evaluate policies and measures related to References

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The WTP values reported in the present work indicate that
apart from quantitative attributes such as travel time and travel
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etc. This emphasizes the need for a transportation improve-
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In the context of modeling techniques deployed for analyzing
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choice sets across each individual and mean heterogeneity are
taken into consideration. However, no systematic pattern is ob-
served in WTP estimates across different RPL model specifica-
tions. The present work demonstrates successful application of
the sparsely used constrained triangular distribution of random
parameters in the development of RPL models.
Acknowledgments
The work presented in the paper is based on the research project
sponsored by the Department of Science and Technology 共DST兲,
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