# Taxi Operators Costing

## Key Difference from Bus/Truck

Passenger buses / goods trucks charge on the basis of passenger-km or tonne-km travelled.
Taxis charge purely on the basis of kms travelled (not on number of persons).

## Two Types of Kms for a Taxi

A taxi's total travelled distance comprises:

1. Kms travelled WITH passenger (revenue-earning)

2. Kms travelled WITHOUT passenger (searching for next passenger — non-revenue)

## Rate Determination

A taxi operator must recover all costs (including the cost of empty running) only from the kms travelled with passengers.

$$\text{Rate charged per km} = \frac{\text{Total Cost}}{\text{Kms travelled WITH passenger}}$$

Important: The denominator is only the passenger-carrying kms, not the total kms — because empty kms generate no revenue but still incur cost.

Worked example

### Example 1

Example:

A taxi travelled a total of 5,000 km, of which 40% of time it was searching for passengers (empty). Total cost incurred = ₹9,000.

Solution:

Kms WITHOUT passenger = 40% × 5,000 = 2,000 km
Kms WITH passenger = 60% × 5,000 = 3,000 km

Rate to be charged per km:

$$= \frac{₹9{,}000}{3{,}000 \text{ km}} = ₹3 \text{ per km}$$

The taxi must charge ₹3 per running km (with passenger) to recover the full ₹9,000 cost.

⚠️ Common exam mistakes

Dividing total cost by total kms (including empty kms) — this would under-recover the cost
Treating taxi like a bus and calculating cost per passenger-km
Ignoring that empty-running cost must be loaded onto revenue-earning kms

Reference:

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