Ola, Uber surge pricing hits Karnataka wall

By: | Published: October 10, 2015 12:27 AM

The Karnataka government is in the process of drafting new guidelines for online taxi-hailing services.

online cab servicesThe Karnataka government is in the process of drafting new guidelines for online taxi-hailing services.

The Karnataka government is in the process of drafting new guidelines for online taxi-hailing services. One of the key decisions is likely to involve abolishing peak-time surcharges levied by Ola, Uber and other operators.

Earlier this week, the Centre had directed that app-based taxi aggregators be treated as normal taxi operators and not as developers of any digital technology. Following this, the Karnataka government is now framing its own guidelines, which these operators will have to abide by. This would essentially mean that these online taxi services will have to follow the state’s City Taxi Service Scheme of 1998. The fresh guidelines are expected to be in place by October end.

During peak hours, which these companies define based on demand and supply, customers are charged up to seven times the actual ride cost. Speaking to FE, Karnataka transport commissioner Ramegowda said, “The online taxi service should adhere to the state government’s City Taxi Service Scheme of 1998, and follow the same pricing norms (fixed by the transport department) as others. They are already violating various provisions and we have been seizing at least 15 vehicles every day from these operators. Strict action would be taken against them for overcharging customers and also for arbitrary pricing.”

An official from one of the taxi aggregators, who did not want to named, denied any vehicle operated by the company was seized in the past week. The official further said it was unfair for the government to ask the firm to follow a more than 15-year-old policy that does not take into account the evolution that has happened in the transportation sector over the last few years.

However, Ramegowda has said the department had sought a report from the online taxi firms on how the peak-time charges are levied, and that the response was not “satisfactory”. The taxi aggregators seem to differ in their opinion on the peak-time charges and state that dynamic pricing is no different from what the airline industry follows.

An Uber spokesperson told FE: “We sincerely believe that fares should continue to be determined by the marketplace to allow consumers to take advantage of reliable and affordable transportation facilitated by the use of modern technology and algorithms.”

The spokesperson added, “As such, the introduction of price ceilings would limit our ability to provide safe and reliable rides during peak times — including in times of need when riders are lacking suitable options.”

On the peak-time charge, customers are informed about the inflated charges at the time of booking, which they can accept or deny. Ola, which declined to comment on the violations, however, had explained the rationale behind peak timer charges on its blog in March. It said, “Peak pricing is triggered when there is too much demand and not enough cabs to service the additional demand. This is usually during peak travel hours; during office hours like 9 am or 6 pm, special events such as a strike or periods of extreme weather. It is NOT at fixed times, but varies depending on the demand at the hour.”

Ola and Uber have been at loggerheads with the state transport department for over a year now. In March this year, government officials raided Ola’s offices in Bengaluru as part of an inquiry into alleged irregularities in the company’s pricing systems. Again in June, the department officials claimed to have seized 100-odd airport taxis operated by Uber, Ola and others, which were allegedly running without valid permits, or without installing digital meters and for collecting fares higher than those fixed by the department.

Amid stiff competition, both companies have been rapidly expanding in India. While Uber has committed to investing $1 billion, Ola has raised close to $500 million for its expansion plans.

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