It’s time for Centre to draw fine line or it may over-regulate cab-aggregation business

By: |
December 03, 2020 5:45 AM

Centre does well to facilitate formalisation of digital ride-hailing economy, but must wind down regulatory overkill

Drivers can no longer extend the daily ride period beyond 12 hours—extended hours jeopardised road safety.Drivers can no longer extend the daily ride period beyond 12 hours—extended hours jeopardised road safety.

One of the pain-points for the cab-aggregation business was the lack of regulatory certainty—different states adopted different regulatory approaches. Against this backdrop, the Centre coming out with guidelines should have offered some succour. However, the new rules seem to be just as hard a pinch. Aggregators are now required to abide by the city-taxi fare indexed by WPI inflation or operate with a minimum base fare of Rs 25/30 per km. Additionally, surge-pricing is capped at 1.5 times the base price while they can provide a discount of no more than 50% on the base fare. The new norms also cap the aggregator-platforms’ commission at 20%, while saddling them with the requirement to provide health insurance to each driver to the tune of Rs 5 lakh, with a 5% increase every year and term insurance of Rs 10 lakh. It is not clear who shall bear the cost of this, with the recent Social Security guidelines mandating companies to invest 1-2% of their annual turnover or 5% of profits in social security, but the burden has been placed on the companies.

That said, the government has done well to formalise the industry. Drivers can no longer extend the daily ride period beyond 12 hours—extended hours jeopardised road safety. Riders, on the other hand, will need to have KYC clearance to avail ride-pooling and cab-sharing services. Additionally, female riders can opt for all-woman ride-sharing. Now, the driver and cab aggregator both will have to pay 10% or Rs 100, whichever is higher, for cancellation of rides. The real turnaround, however, are the car-pooling rules. While it is left to the discretion of the states to decide on car-pooling, states not wanting to implement the policy will have to give the reasons in writing. As per new guidelines, personal cars can ferry passengers four times in a day for intra-city travel and two times a week for inter-city. The boost to shared transport and, consequently, the gains to the environment, as also the utilisation of idle capacity, are big positives. While the Centre has done well to formalise the sector, it must wind down over-regulation that may end up killing innovation.

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