Online cab rides improve to 30 million in October but new govt rules may impact market in long term

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Updated: November 29, 2020 6:46 PM

The ‘aggregator’ segment mainly controlled by Ola and Uber, according to the rule, is now allowed to charge fare “50% lower than the base fare and a maximum Surge pricing of 1.5 times the base fare.”

modi government issued guidelines for regulating aggregators like ola uberThe rules had maintained that drivers should get at least 80 per cent of the fare applicable on each ride.

The number of app-based cab rides has been able to post a very gradual recovery after the pandemic as riders have been refraining to use such services due to the Covid scare. From around 68 million cab rides by customers in January this year, which came to a complete halt during the lockdown, improved to only around 30 million in October on platforms such as Ola and Uber, according to the RedSeer data. This is up from around 15 million rides that were enabled by the cab-hailing platforms in September. The overall ride-sharing segment, which included online booking of cabs, bikes, and autos, stood at 115 million monthly rides as of January 2020.

While around 70 million rides belong to cabs, around 20 million came from bikes and the rest from autos. “Recovery of cabs has been slowest at around 21 per cent in September from January level in monthly rides. As of September, out of the 35 million, only around 15 million rides belonged to cabs,” Saurav Chachan, Senior Consultant, RedSeer had told Financial Express Online.

The recovery of the ride-hailing market assumed further significance amid the issuance of the Motor Vehicle Aggregator Guidelines by the Ministry of Road Transport and Highways on Friday. The ‘aggregator’ segment mainly controlled by Ola and Uber, according to the rule, is now allowed to charge fare “50% lower than the base fare and a maximum Surge pricing of 1.5 times the base fare.” The rules maintained that this will “promote asset utilisation which has been the fundamental concept of transport aggregation and also substantiate the dynamic pricing principle, which is pertinent in ensuring asset utilisation in accordance with the market forces of demand and supply.”

Comments from Ola on the guidelines would be updated here as and when available. Uber declined to comment.

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However, according to the market expert, this might not turn out well in the long term. “Overall the impact of these guidelines on the ecosystem growth is negative as capping surge and platform fee will ultimately lead to reduced earnings for 5 Lac drivers (currently on these platforms) and will also lead to increased prices and higher wait times for the 6-8 crore consumers who use it for their mobility and commute needs,” said Ujjwal Chaudhry, Associate Partner, Consumer Internet, Redseer.  On the positive end, the guidelines will lead to formalizing the sector as well as increasing the consumer trust in aggregators through better safety regulations, he added.

Last year in September, community social media platform LocalCircles had, based on its survey around rules suggested by citizens for Ola and Uber and other aggregator models, written to the road transport minister Nitin Gadkari for the same. It had sought surge pricing to be capped at 25 per cent and Rs 100 or an amount equivalent to 20 per cent of the fare to be credited in the customer’s account as a penalty for cancellation of the ride by the company or driver.

“Looks like the Govt accepted our ask on surge capping at 1.25 (of base fare) and the penalty for driver ride cancellation amongst others,” Sachin Taparia, Founder and Chairman, LocalCircles told Financial Express Online. Cancellation of ride by the driver after accepting the ride request on the app and customer after booking the request will attract a penalty of 10 per cent of the total fare not exceeding Rs 100, the rules noted.

The regulation also said that the driver should get at least 80 per cent of the fare applicable on each ride while only 20 per cent remaining fare should go to the company. The government also said that states may “by way of a notification direct 2 per cent over and above the fare towards the state exchequer for amenities and programmes related for Aggregator operated vehicles, which have been helpful in reducing traffic congestion to a great extent and subsequently reducing pollution.”

This story was updated with Uber’s response to the request for comment.

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