Why Ola and Uber may have to stop services in Karnataka

  • Sayan Chakraborty, Livemint, Bengaluru
  • Updated: May 30, 2016 09:43 IST
State govt implements the Karnataka On-demand Transportation Technology Aggregator Rules 2016, which requires businesses to hold ‘effective licence issued to him under these rules. (Hindustan Times)

Ride hailing services such as Ola (ANI Technologies Pvt. Ltd) and Uber Inc. may have to stop their services in Karnataka, one of the their largest markets, if the state transport department has its way.

In a statement issued on Saturday, the state transport department said that the government has implemented the Karnataka On-demand Transportation Technology Aggregator Rules 2016, which requires businesses to hold “effective licence issued to him under these rules”.

A statement issued by the commissioner of transport’s office on Saturday stated that taxi aggregators who are yet to obtain relevant licences should immediately stop operations, a move which could put a spanner on the operations of Ola and Uber, at least temporarily.

“Web-based aggregators had to obtain licences to operate cabs and taxis. But many aggregator companies have not obtained licences, but are operating such cabs. This is a gross violation under sec-93 r/w 193 of the Motor Vehicles Act. Hence, companies which have not obtained licences from the concerned authority should stop operations with immediate effect otherwise strict action will be taken against such operators,” the statement said.

The Karnataka On-demand Transportation Technology Aggregator Rules 2016, which was notified in April, said, “No person shall act or permit any other person to act as an aggregator unless he holds an effective licence issued to him under these rules”.

Ola and Uber did not immediately respond to an email seeking comment.

The government’s latest initiative may significantly impact Ola and Uber’s business, given that Bangalore is one of the biggest markets for the ride hailing services, according to multiple industry executives.

To be sure, this is not the first salvo fired by the state transport department at companies such as Ola and Uber. Both companies had earlier found themselves in the eye of a storm on multiple occasions in the last couple of months, with the transport department first cracking down on bike taxis services and then impounding vehicles to arrest surge pricing.

Both companies have since withdrawn bike taxi services, which was initially launched in March. Both companies, however, continue with surge pricing, where a consumer is charged multiples of the actual fare when supply of cars drops.

The state transport department has conducted multiple raids, impounding cabs for surge pricing on consumer complaints.

The Karnataka On-demand Transportation Technology Aggregators Rule said aggregators cannot charge passengers more than the fare fixed by the government.

The fare mandated by the Karnataka transport department is Rs.19.50 per km for air-conditioned cabs and Rs.14.50 for ones without air conditioning. Incidentally, the cap mandated by the state government allows both Ola and Uber to charge multiples of their fares.

For instance, UberGo, Uber’s cheapest option, is priced at Rs.7 per km in Karnataka, which implies that it allows Uber to charge consumers up to 2.7 times the cheapest rate. Ola’s cheapest variant, Micro, costs at Rs.6 per km, which essentially allows surge pricing of up to 3 times the cheapest option.

Incidentally, both companies had run into trouble in Delhi as well, another key market.

The state government had threatened to crack down on Ola and Uber if they did not stop surge pricing, after a series of consumer outbursts on social media, especially in the wake of implementation of the odd-even rule in Delhi.

Uber and Ola temporarily suspended surge pricing with immediate effect on 18 April. The decision came after a notice issued by the Delhi high court to the state government to look into the allegations of ‘over-pricing’ rides, Mint reported on 19 April.

This article was first published on Livemint

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