ECONOMYNEXT – Sri Lanka authorities have to enforce law against violent tactic employed by tuk-tuk gangs against PickMe and Uber drivers who charged lower fares, information and media minister Nalinda Jayatissa said as the the island’s tourism brand as a safe destination is also coming under threat.
Some regional tuk-tuk driver associations, especially in tourist hotspots have intimidated fellow drivers working through ride-hailing apps like PickMe and Uber who were competing by charging lower fares from foreigners and locals.
Halting Competition by Violence
“Whether or not there is competition using mafia tactics (mara balaya) is wrong,” Minister Jayatissa said.
“The law can be enforced. The police is taking action. Using gang tactics is or violence (ma-rer bala-yer or prachan-duth-weryer is wrong.”
PickMe, one of the top rid-hailing app companies has protested that police is turning a blind eye to the violence and intimidation of their drivers by other tuk-tuk operators.
“I believe one or two arrests have been made,” Minister Jayatissa said.
Victims have made comments on social media alleging that selective implementation of the law by policemen are siding with the tuk-tuk mafia because some policemen own tuk tuks themselves that are overcharging.
Potectionist Tuk tuk associations have carried out public protests claiming they had the right to overcharge customers in several geographical areas.
PickMe drivers who are charging less than ‘mafia’ prices are also Sri Lanka citizens, sometime from the same town.
The collusive or mafia style pricing emerged in the tourist hotspot of Ella and has since spread to other areas.
Sri Lanka at one time had taxi-metres, which led to a large shift of people from buses to three wheelers, which were cheap before the last economic crisis led to a collapse of the rupee from rate cuts.
Collusive Pricing
After the spikes of tuk tuk fares after the collapse of the rupee from rate cuts made for flexible inflation targeting and potential output targeting, three wheeler association started announcing collusive fares by press conference, undermining competition.
Some drivers who started charging 85 to 90 rupees per kilometre after petrol prices fell were also intimidated by regional tuk-tuk association members and they were forced to raise prices to 100 rupees a kilometer, according to drivers who attempted to bring down fares.
However, in tourist hotspots, travellers are charged three to five times the normal fare.
In a viral video a, tuk-tuk ‘mafia’ advocated is heard telling a police that the they are charging 1,500 rupees to go near the nine arches bridge while the other using apps are charging only 550 rupees.
Meanwhile the current administration had set up a regulator for three wheelers, which will expand the already bloated state, lead to more regulations and result in higher costs for tax payers.
Minister Jayatissa told reporters he was not aware of the status of the regulator, which he will have to check with the transport ministry.
In Sri Lanka regulators had ended up being price control agencies, which led to the collapse of quality, not agencies that promoted competition or innovation.
Regulated prices could also lead to collusive pricing if price controls are imposed and can even kill the competition from ride hailing aps and other drivers who charge more market based prices kill innovation and quality as had happened in public transport, analysts say.
Unlike cost-based pricing which are based on some bureaucratic assumptions, ride hailing apps provide lower prices by reducing idle times and reducing empty return journeys (maximizing the capital output ratio) and also using time-based pricing which can shift some traffic from peak to off-peak.
‘Foreign’ competition from Negombo
Three wheeler drivers are employing the same tactics against consumer that large companies in tile, ceramics and tinned fish to with government collusion and import duties.
The so-called ‘tinned fish mafia’ has made the government impose a total ban on imports like in the 1970s.
While the larger corporates have used Sri Lanka’s borders to keep out mainly foreign competition and protectionism through import duties and licensing, three wheeler drivers are using smaller geographical areas to keep out ‘foreign’ competition from other districts or towns with
“Don’t run PickMe here,” a policeman in the central hill-town of Ella is heard in one of the youtube videos that went viral telling a ‘foreign’ driver from a coastal town.
“You run Pick me in Negombo. There are vehicles here. There are vehicle owners here. They have also got finance leases.” (Colombo/Jan04/2025)