Since the 20th century Premier Padmini (Fiat) taxis are taken away from the Mumbai roads with a view to modernize the taxis, a lot of options have been discussed. Secretaries of the taxi associations in Mumbai went on a Singapore trip to look at the structure there and commented that the same structure cannot be followed in Mumbai because the Singapore system was akin to slavery.
Wierd, because many of the taxis in Mumbai also run on the same principle. The taxi driver pays the taxi owner (car company in S'pore) about Rs. 150 per day ($90 in S'pore). All other conditions are pretty much the same (petrol/gas paid for by the driver, maintainence and insurance paid by the owner/car company).
The only people benefitting from the current arrangement are the taxi owners (different from the taxi drivers), as they make ~Rs.3K per month (post maintainence and other expenses, I doubt if any Mumbai taxi is insured) for doing nothing other than owning the vehicle (approx cost. Rs.50K).
My bet for a possible solution is to keep the taxi-license and the taxi-driver's license separate. The taxi license can be issued to any person owning a vehicle which satisfies the required norms (I hope the new norms are stricter w.r.t the quality of cars, safety aspects, etc). The taxi-driver's license can be issued to any person (again, the union will demand that their members be given the licenses first, I have no problems with that if they satisfy the basic conditions for being a taxi driver)
A look around the world will tell us how bad the Mumbai taxis are. London uses anachronistic taxis, but they are surprisingly comfortable, fuel efficient and well-maintained, Paris/Munich/Berlin/Brussels use Mercedes Benz and Volkswagen taxis, New York Ciry uses its long Fords (though I personally do not like the Ford taxis) and Camrys and recently, cars looking like the Toyota Innova, Seoul uses Hyundai Sonata and other cars. Yes, these are developed cities, but why go any further, taxis in Colombo are air-conditioned Mitsubishi Lancers and the rates are not too different from Mumbai cabbies. So what is a good option for Mumbai? Two vehicles come to my mind. The Indica diesel / CNG and the Maruti Omni LPG (Maruti van for some). Reasons : Low Price, lots of space for 4 passengers + luggage, low operating and maintainence expenses, safety (in an Indica, need to ascertain the safety aspects for the Omni).
Considering the cab economics in Mumbai, a taxi has to be profitable for the driver as well as the owning company. Assume that the owning company will still make ~Rs.3K after the new rules come in (i.e., they will rent the taxi out for Rs. 150 per day) and the driver will continue to make as much as he made before (As consumers, we don't want to have increased cab rates, do we???). For an investment of 3 lakhs (for an Indicab), it gives an ROI of 12% while for the Omni, the ROI is an attractive 18%. If the new Tata car (priced at less than 1.5 lakhs) is introduced sooner, the equation may change in favour of the taxi drivers with the daily rentals decreasing to as low as Rs.100 and in favour of the commuters with a decrease / no increase in rates. For the taxi drivers, the ecomomics is simple. 8 hrs of taxi driving @ Rs. 50 per hr yields Rs. 400. Fuel = Rs.100 (Yes, the LPG/CNG option is that cheap, even diesel is not too different, but is more polluting), rent = Rs. 150, Leaves him Rs.150 daily. A 10 to 11 hr day will fetch the driver Rs.250
An investigation needs to be done into the feasibility of each driver owning his vehicle and floating a company for the same, I am sure this option would eliminate the complaint of the perceived slavery which the taxi drivers' association has. Finance options can be made available to the drivers for purchasing the new vehicles (sans taxes, because it is a public vehicle).
What happens to the old vehicles? Well, Premier Padminis sell @ around 30K (n'th hand, n>2). These would probably be picked up for use as taxis in some smaller towns, as they are cheaper than the Bajaj autorickshaws !!!
All in all, Mumbai can get better cabs with no negative effects for the commuters and taxi drivers.