Why Auto Aggregators Are Facing The Heat From Karnataka Government

On October 6, the Karnataka Transport Department issued a notice to Uber, Ola and Rapido, asking them to cease app-based auto rickshaw services in the state within three days.

A week later, having been taken to the Karnataka High Court by the said companies, the court ordered the Karnataka government to stay the ban on the aggregators till November 7, while also directing all parties involved to develop a pricing mechanism.

Between these two events, there were writ petitions filed, trials held and warnings issued. Here’s everything you need to know about the tussle.

Why Karnataka Banned Autos?

In the notice dated October 6, the state’s transport department noted that the apps were overcharging for the rides. This was the primary reason for the ban.

“Auto services should be stopped, and customers should not be charged more than the government-prescribed fare,” the notice said, calling the practice of charging around INR 100 for even a two-kilometre ride illegal.

The Karnataka government has prescribed a fixed auto fare of INR 30 up to the first two kilometres (this is a fixed cost; even if you travel one kilometre, you’ll have to pay INR 30) and INR 15 for every subsequent kilometre.

Uber, Ola and Rapido were accused of charging more than the prescribed fare, which resulted in users filing several complaints with the Karnataka transport department. The transport department then moved to ban the app-based autos, citing the said complaints.

Another reason for the ban was the absence of any auto-related norms in the aggregator licence issued by Karnataka’s transport department. 

The transport department said that the aggregators violated the Karnataka On-Demand Transportation Technology Aggregators Rules, 2016 by running auto services.

No Boots On The Ground

Interestingly, the Karnataka government did not move to enforce the ban outright and no cases were reported of the transport department impounding autos. However, the state’s government, including Home Minister Araga Jnanendra and Transport Minister B Sriramulu, did hold meetings on the matter and issued warnings.

Jnanendra held a high-level meeting with the police department three days after the state announced the ban. The meeting was reportedly centred around enforcing the ban; speculation was rife that the police and the transport department might launch a joint operation to curb app-based autos.

Transport minister Sriramulu also warned auto aggregators twice. Two days after the ban, he said that the authorities would seize the autos that were found to be operating on aggregators’ platforms despite the government order.

On a different occasion, Sriramulu also said that the Karnataka government might build a government-backed aggregator app for autos.

However, the state government appeared not too keen on enforcing the ban, as all three auto aggregators operated in the state without any difficulties.

While none of the aggregators stopped their services, they did reduce fares to match government-prescribed fares.

It is prudent to mention that in a 2016 case, a division bench of the Karnataka High Court had ruled that the authorities can’t take coercive measures against aggregators.

The Court Case

Ola and Uber filed writ petitions with the Karnataka High Court on October 12 and 13, respectively, praying for a stay on the ban. 

The court combined the two cases and ordered the state government to hold talks with the app aggregators and sort the issue of auto fares by October 14. Incidentally, there was no discussion on the legality of aggregators offering auto services during the hearing. 

“Steps would be taken to come to a consensus as regards the fare being charged by the petitioners are concerned, by calling for an emergent meeting not later than [the] afternoon of this day,” the single-judge bench of Justice MGS Kamal said in his order dated October 13.

On October 14, the High Court issued an interim order for a stay on the ban. Justice Kamal also directed the government and the auto aggregators to discuss and come up with a fair pricing mechanism.

The companies argued before the single-judge bench that according to the contract of carriage described in Veeramani v. the Regional Transport Authority (1980), a motor cab is a vehicle that is used to carry less than six passengers, excluding the driver, for hire or reward. Hence, an auto-rickshaw could be defined as a motor cab.

Further, the aggregators argued that under the Karnataka Contract Carriages (Acquisition) Act, 1976, an entity could obtain a licence to operate a motor cab.

Besides, the counsel for the aggregators pointed out that certain mistakes were made when transcribing an order dated December 13, 2016, in a case about the constitutionality of the licence regulations. The order was edited to omit the requirement of a licence to operate as an aggregator in the state.

On the matter of high pricing, the aggregators argued that while there are no regulations on pricing, they are charging “just and proper” charges.

For now, the court has granted 15 days to all the parties involved to come up with a pricing mechanism. The court further directed the authorities to avoid taking any coercive measures against the companies. 

The High Court also allowed Uber, Ola and Rapido to charge 5% GST and a 10% convenience fee on the total fare, from the fixed fee of INR 40 per ride. The case is set to be heard in court on November 7. Till then, the auto aggregators are free to apply for a new licence or renew their existing licences.