TAXI WARS

As Uber turns off surge pricing in Delhi, Bengaluru already (sort of) banned it

The new rules put a ceiling on maximum fares but the limit is still three times higher than lowest cab prices.

No more ridiculous surge prices of six or seven times on Ola and Uber. At least not in Bengaluru. The Karnataka government's decision to regulate app-based taxi services this month came with new restrictions on how much services like Ola and Uber can raise tariffs based on demand. These may even provide a template for responses in other states, like Delhi, where Chief Minister Arvind Kejriwal has promised "strict" action against app-based services.

Surge pricing, as its known, often means that customers have to deal with fares that are several times the actual rate advertised by these companies. Ola and Uber have fought against any regulation of surge pricing, insisting that they provide incentives for drivers to move into high-demand areas and ensure customers always have access to cars.

The Karnataka government doesn't entirely agree. In new rules now being enforced, authorities have mandated that air-conditioned cabs will not be able to charge more than Rs 19.50 per kilometre from riders. Those without an AC can only bill up to Rs 14.50 per kilometre.

This does not mean a ban on surge pricing – it simply means there is now a ceiling on the surge pricing by laying down the maximum amount that can be charged at any time, which is equally applicable toweekend nights or during rush hour.

What this means is that companies like Ola and Uber can still charge a premium in periods of high demand up to three times their prices if one goes by their minimum pricing for cabs.

Uber’s cheapest service is UberGo which starts at Rs 7/km while Ola Micro runs small hatchbacks starting at Rs 6/km in Bengaluru. Thus, even with the newly announced limits, users might end up paying three times the usual fares of these services.

Both Uber and Ola have submitted their list of objections to the new policy to the government which has already started clamping down on cab companies for violating the rules. Over the past week, at least 20 vehicles from the two companies have been seized by the transport department for violating the new provisions and the crackdown is likely to intensify in the coming days.

“Every day, we are receiving complaints on Ola and Uber charging consumers higher than the limit set by the government. We cannot allow surge pricing. The enforcement will be beefed up in the coming days,” HG Kumar, additional commissioner for transport and secretary, state transport authority told Mint.

Surge policy

This might not be the end of this tale as the new rules allow the government to nix the price ceiling as and when it wishes to do so, implying that it could lower it even more if enough users complain about surge pricing or might just make it higher – if cab companies argue their case well enough.

And Karnataka may only be the first. Delhi Chief Minister Arvind Kejriwal, whose government has already toyed with banning cab services altogether in the past, took to Twitter to suggest he would once again be looking to take action against the apps. This prompted Uber to suspend surge pricing in the capital, given the "threat to the livelihood" its driver-partners.

Moreover, Maharashtra is already walking in Karnataka’s footsteps by moving to cap fares which can be charged by taxi apps. The transport department in the state has already submitted a proposal to the government to fix fares and regulate surge pricing.

“The fare will be decided on the cost of the vehicle and the engine capacity. The transport department will enjoy powers to cancel licences for non-compliance,’’ a Maharashtra minister told Business Standard.

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