Indian states tightening screws on Ola, Uber

Karnataka ban on ride-sharing is in step with other local governments who are revisiting and revising their regulations on taxi-hailing aggregators

February 1, 2017 12:48 PM (UTC+8)
Ola co-founder and CEO Bhavish Aggarwal addresses a press conference in Bengaluru on November 22, 2016. Photo: AFP / MANJUNATH KIRAN
Ola co-founder and CEO Bhavish Aggarwal addresses a press conference in Bengaluru on November 22, 2016. Photo: AFP / MANJUNATH KIRAN

In the Indian state of Karnataka, UberPOOL and its local rival Ola Share have just been banned. For users, it’s an inconvenience, but Karnataka is not alone: more and more states are revisiting and revising their regulations on taxi-hailing aggregators.

The Karnataka government ruled on Monday that in accordance with state laws such companies can only offer point-to-point services and not stops and pick-ups within trips. It gave three days for Uber and Ola to halt their ride-sharing services in the state.

Regular users such as Kavita V Iyer are unhappy with the move. “Taxi-sharing is more time-consuming and drivers roam a few extra kilometers to pick up passengers and fill the spaces,” she says. “But I am fine with that as it costs less.”

Bengaluru isn’t well served by an extensive metro and is burdened with frequent traffic standstills and polluted air. An end to ride-sharing will do little to tackle these issues.

In an emailed response to a query from Asia Times, Uber said: “With the cost of shared rides up to 50% lesser than solo ones, the response to UberPOOL in Bengaluru has been phenomenal. Over 25% of our total trips in Bengaluru are shared. In one year, UberPOOL users in the city have saved around 9.36 million kms, which translates into saving 440,623 litres of fuel and over 1.37 million kgs of carbon emissions.”

Leo Saldanha, a local environmentalist, believes ride-sharing is an example of optimal use of technology. “If the law doesn’t permit this, then we must look for ways to amend it especially if it is in the interest of the people. This may be a motivated ban. Cab owners may have felt the pinch.”

Another taxi user, Dr. K. Hemanth Kumar, says: “Buses are crowded. Some of the autowallahs try to fleece us. Rules and meters are there in place but, quite often than not, ignored. Public transport do not provide that last mile connectivity. I consider taxis to be relatively safe. But still, Uber and Ola do not offer the perfect rides as sometimes I encounter rude drivers and inordinate pick-up delays. Those issues need to be resolved.” Hiring cabs, he adds, is much cheaper than owning and maintaining a car.

The ride-sharing ban is likely to hit both firms hard. Bengaluru is one of their top three markets in India, alongside Delhi and Mumbai, and both companies have been aggressively promoting ride-sharing.

“I consider taxis to be relatively safe. But still, Uber and Ola do not offer the perfect rides as sometimes I encounter rude drivers and inordinate pick-up delays”

Last year, the state government banned bike-taxi services UberMOTO and Ola Bikes, citing the same regulations as they did on Monday. The 2016 Karnataka On Demand Transportation Technology Aggregators Rules state that intra-trip pick-ups are for buses only.

Cab aggregators face hostile environments in several other states too. Maharashtra is not against ride-sharing services. However its draft Maharashtra City Taxi Rules propose to tighten control over cab aggregators and make them more accountable. The rules would empower the State Transport Commissioner to fix fares, make the companies responsible for any errant behaviour from drivers, and issue licences and permits to them.

The Delhi government, too, drafted a policy last year under which cab companies will have their fares set by the Transport Department.

Moreover, all of these local authorities have moved to curb surge pricing, where fares are automatically increased during high demand. Strict safety measures and training programmes for drivers have also been prescribed. Nevertheless, concerns about safety and overcharging persist. Other objections relate to the impact of cab-aggregators on traditional taxi and autorickshaw businesses.

“In one year, UberPOOL users in the city have saved around 9.36 million kms, which translates into saving over 1.37 million kgs of carbon emissions”

Most state and local jurisdictions in India are either modifying existing taxi regulations or introducing new ones to keep pace with advances in mobile technology and ensure safety. As with the ride-sharing ban in Karnataka, Uber considers some of these regulations to be outdated and, more crucially, incompatible with its business model.

In India, road transport comes under the purview of state governments. The central government is pushing for technological innovation and deregulation, but these policies are not binding on states.

India’s cab business, according to SoftBank Group, may be worth US$7 billion by 2020. Ola was valued at US$5 billion in 2015, making it the country’s third highest-valued venture-backed startup after online retailers Flipkart and Snapdeal. Uber claims to be as big as Ola in India and is now valued at US$51 billion, according to Dow Jones VentureSource. The cheapest rides on OlaMini and UberGo cost Rs5 (US$0.07) to Rs8 (US$0.12) per kilometer.

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