The transport authority in Hangzhou, capital of Zhejiang province, may drop the monthly fees imposed on taxi drivers to help them cope with the competition they face from taxi-hailing apps.
Hangzhou is the first city in the country to suggest a solution to help the struggling taxi industry, which recently suffered further pressure from competition with ride-sharing services.
Taxi management companies have to pay local traffic authorities for the right to operate their businesses. The cost is actually paid by the taxi drivers and deducted from their monthly income.
However, they will no longer need to pay such a fee, backdated to the beginning of this year, according to a draft of guidelines for the reform of the taxi industry in Hangzhou, published on Monday.
The draft will be made public before Sept 24.
Lu Xiande, deputy director of Hangzhou Transport Bureau, said the policy means each of the 9,910 taxis in the city can save 400 yuan ($63) per month.
Usually two drivers share a taxi and drive every other day. Drivers will get refunded for fees paid since January.
Some taxi drivers in Hangzhou said the reform offers a glimmer of hope for them.
"Although I can make a turnover of around 14,000 yuan every month, I need to pay nearly 10,000 yuan to the company and government, as well as on repairs, insurance, carwashes and fuel," said Wang Chen, who has been a taxi driver for seven years.
Wang said some of his peers have opted to drive for the ride-sharing service Uber in recent months.
"They can get attractive net earnings of more than 15,000 yuan a month," he said.
Uber has shaken the taxi industry in many cities across China. It began operating in Hangzhou last year. The Hangzhou Transport Bureau said that the passenger volume for taxis dwindled from 23 million in April to 15.7 million in July.
Qian Bin quit his job as a taxi driver in Shanghai last year, and said the tough situation for drivers in the city has now led to a shortage of taxis operating there.
"Many joined the wave to drive for Uber. Those who still struggle on in the industry need to work at least one more hour a day to maintain their income at its original level," said Qian.
Although Uber is not the only reason that taxi drivers are leaving the industry, the competition between taxis and ride-sharing services brings the situation in the taxi industry into the spotlight, said experts.
"Competition is always good, which will bring about new products through market adjustment mechanisms and offer profits to taxi drivers, as well as the public," said Li Hongchang, deputy director of China Transportation Economics Research Center at Beijing Jiaotong University.
Wang Xiaolei, a researcher with Sino-U.S. Global Logistics Institute at Shanghai Jiao Tong University, suggested adopting taxi fares that can be determined by the market to further motivate taxi drivers.