Surge pricing: Uber defends policy, says driver benefit

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Bangalore | Updated: April 14, 2016 10:21:12 AM

According to Uber, when demand for rides outstrips the supply of cars, surge pricing kicks in, increasing the price. It said there is complete transparency when the surge pricing kicks in

Uber, the transport aggregator, has submitted its objections to the Karnataka transport department on the ban on its surge pricing policy while claiming that beneficiaries from the spike in fares during peak demand are the drivers.

In a statement, Bhavik Rathod, GM South, Uber India said, “The government of Karnataka has taken a step forward in laying down sector specific regulations for mobility platforms like Uber. We have submitted our objections to the transport department in connection with the notified regulations and are engaged with the government.”

Earlier this month, Karnataka government framed On-demand Transportation Technology aggregators Rules, 2016, to restrict cab aggregating services like Ola and Uber using surge pricing. According to the rules the maximum per-km fare will be R19.50 for AC cabs and R14.50 for non-AC ones. Also, taxis will not be allowed to charge more during peak hours.

According to Uber, the rise in price is not a new concept: Surge pricing is not unique to us – airlines, hotels use the same pricing principles to match demand and supply. It is also sending personalised e-mails to its consumers in Bangalore explaining how dynamic pricing or surge works.

According to Uber, when demand for rides outstrips the supply of cars, surge pricing kicks in, increasing the price. It said there is complete transparency when the surge pricing kicks in as it asks for the consent of the consumer.

“Surge pricing has two effects: people who can wait for a ride often decide to wait until the price falls; and drivers who are nearby go to that neighborhood to offer you an option to get a ride–for a little bit extra. Nearly all surge profits go directly to drivers as part of their fares. As a result, the number of people wanting a ride and the number of available drivers come closer together, bringing wait times back down,” it said.

It is economics of supply and demand which lead to surge in prices, Uber added.

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