Meru, Easy Cabs hope new regulations will level the playing field with Ola, Uber | business-news | Hindustan Times
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Meru, Easy Cabs hope new regulations will level the playing field with Ola, Uber

As the Cabinet approved Motor Vehicle Act of 2016 (MVA) earlier this week, app-based cab-hailing firms, Ola and its American rival, Uber, are under the government’s pressure to change the way they function.

business Updated: Aug 11, 2016 23:19 IST
Sunny Sen
The rules under the newly enacted Motor Vehicles Act  will create a level playing field for cab aggregators and radio taxi companies.
The rules under the newly enacted Motor Vehicles Act will create a level playing field for cab aggregators and radio taxi companies.(Hindustan Times)

As the Cabinet approved Motor Vehicle Act of 2016 (MVA) earlier this week, app-based cab-hailing firms, Ola and its American rival, Uber, are under the government’s pressure to change the way they function.

To make matters worse for them, the Delhi government on Wednesday said aggregators will have to install fare meters.

Nowhere in the world do Uber cabs have fare meters. The company decides the price, pays what it wants to its drivers, and calculates the fare on the basis of GPS tracking.

The new rules, once implemented, will bring Ola and Uber in closer combat with the radio taxi firms such as Meru Cabs and Carzonrent-owned Easy Cabs.

As per the MVA, Ola and Uber will have to take aggregators’ licences, and comply with city taxi rules, which include having only CNG taxis in Delhi and Mumbai. At present, thousands of drivers with diesel cars and tourist licences have joined the app companies for better compensation. Ola has 400,000 drivers, and Uber 270,000.

Ola and Uber pushed radio taxis aside as it used venture capital money to give huge discounts to passengers looking for cheaper rides, in some cases less than what one would pay an auto rickshaw driver. Add driver incentives to the discounts, estimates show that for every ₹100 aggregators earn, they spend ₹200-250. Ola reported a loss of ₹796 crore in 2014-15.

The MVA and the state laws might end surge pricing as well as deep discounts, if the meter, monitored by the authorities, is installed. The Act will also hold the aggregator accountable for quality of services, as there have been a bunch of molestation charges against the drivers of cab-hailing companies.

Radio taxi operators feel finally there can be a level-playing field in the country’s organised taxi business.

“They (Ola and Uber) have violated driver validation norms, they don’t have the necessary equipment, and they have violated fuel norms,” said Rajiv Vij, CEO of Carzonrent.

“With discounts and incentives, the intent is to smoke-out competition and monopolise the market… Once a duopoly is established, the tariffs will be in the range of ₹30-35 per km,” said Siddharth Pahwa, CEO, Meru .

The cab business in India is worth ₹ 59,720 crore, but only 5% of that is with aggregators.

As per the new regulations, if Ola and Uber stop incentivising their drivers, it will be a level-playing field.

“For us, Incentives have taken the supply out of the market. When the demand for cabs rise, customers opt for app-based taxis,” said Rajesh Loomba, managing director of ECO Rent A Car. “In the US, the price differential (between regular taxis and app-based cab-hailing aggregators) is 5-10%, but here it is 50%.”

To put demand in context, Ola drivers received 59.5 million calls, and Uber received 25.4 million, between January and April this year, according to data from a Truecaller report.

When it comes to booking taxis on the go, 220 million smartphone users bet on Ola and Uber.

At present, the state law regulates the number of cabs Ola and Uber has.

For example, in Mumbai, a licence holder cannot have more than 4,000 cabs, 2,500 in Delhi, and all taxis should be run on eco-friendly CNG. Right now, these two aggregators have 50,000-70,000 cabs in Delhi and Mumbai, each.

The demand is likely to be distributed over a larger number of taxi companies.

Carzonrent’s Vij said that any company that is able to deliver a better experience – good cars, responsible drivers, safety, better fares – will win.