Government Intervenes Again; Plans To Limit Ola, Uber Surge Pricing

The Indian Government is reportedly planning to establish a maximum limit on fares to monitor surge pricing by online cab aggregators like Uber and Ola. This move by the government is aimed to protect consumer interest, according to sources close to the development.

The prime focus of the policy would be to allow market forces to play and ensure adequate round-the-clock cab availability, a senior official at the Ministry of Roads, Transport, and Highways stated.

“We do not want to get into the auto-fare meter concept. If fares are too high, market forces will take over. But we cannot allow unlimited surge pricing and will define a maximum cap for the same. It will help in protecting consumer interest in the economy taxi segment,” he said.

Under the mandates of the policy, the government will not order that calibrated meters be made mandatory for cab aggregators. The recommendations by the team would be advisory and non-binding in nature.

These guidelines are being submitted by a panel constituted by the Ministry of Road, Transport and Highways. The final report is scheduled for submission by the end of October 2016. The guidelines of the proposed policy would also apply to the two-wheeler taxi segment in India.

Commenting upon the issue, venture capital investor TV Mohandas Pai said, “Surge pricing is not transparent and difficult to explain. Having a maximum cap on surge pricing to the extent of 2.5-3 times is essential as it will help protect consumer interest. Given that cab aggregators today have great technology, there is no need for calibrated meters to be put in place.”

Cab aggregators have been on the radar of state governments lately. In July, the Karnataka Transport Department issued a notice to Ola, for breaking the rules after obtaining its license in the state. Both Uber and Ola have registered themselves with the Karnataka On Demand Transportation Technology Aggregators Rule, 2016 and while Ola received the license, Uber didn’t.

In July, the Delhi Autorickshaw Sangh and Delhi Pradesh Taxi Union called for an indefinite strike against app-based taxi services in New Delhi. Following that, reports surfaced that the Delhi government is planning to impose a fare restriction on app-based cab aggregators including Ola and Uber. They will be barred from charging tariffs over an upper ceiling set by the Aam Aadmi Party government in Delhi in the future.

In August, relaxing its ban on Ola and Uber with ‘immediate effect’, the Madhya Pradesh government gave the two cab companies a sigh of relief by serving them a notice to comply with the state transport guidelines in a month’s time. Madhya Pradesh transport department had earlier banned the services of Ola and Uber in the state. The ban was imposed because the Motor Vehicle Act doesn’t have any provision regarding peak time charge.

Following that, the Delhi High Court issued a notice to Ola and Uber to stop surge pricing and follow government prescribed fares. It had set August 22 as the deadline for app-based cab aggregators to completely withdraw surge pricing.

While the Indian Government has been playing an active role to control surge pricing, it has also announced that it cannot stop app-based cab aggregators from giving discounts to the consumers. The decision was made by The Delhi High Court during the proceedings of a case.

Earlier this month, the Road, Transport, and Highways Minister Nitin Gadkari assured taxi aggregators that the government is working towards simplifying their problems. He added that cab aggregators should also find a way to integrate traditional black-and-yellow cabs within the purview of their operations.

This development was initially reported by ET.

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