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No Surge Pricing For Online Taxi Aggregators in Karnataka, State Government Lays Out Fresh Regulation

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The issue of surge pricing, i.e., charging fare which is higher than the normal during peak times by online taxi aggregators has been widely debated time and again. Still surge pricing has been followed by Uber and Ola in almost every city where they operate. However, Karnataka government has disallowed the practice in the state  in its latest regulations to ensure competitive pricing for all cab users.

We have not allowed the surge pricing because the purpose of using the technology is to increase service standards for cab users at competitive fares. We have focussed this policy around this, and given a lot of importance to safety aspects.

said Transport Minister in Karnataka government, Ramalinga Reddy.

As per the policy, the fares and other charges must be within the government prescribed band fare whose upper limit is capped.

The app-based taxi aggregators have always defended the concept of surge pricing claiming that such dynamic pricing was no different than the practice followed by the airline industry and allows them to meet the demands of their users efficiently and give them a superior customer service.

Uber, which is known to have first started the concept of surge pricing, has always asserted that surge pricing allows them to provide cabs to the users at the time of emergencies during peak hours. During these times, by introducing surge pricing drivers are also encouraged to provide their services due to the possibility of extra incentive.

Ola also has deemed the practice necessary when there is a gap between supply and demand of cabs. It had restarted surge pricing in Karnataka last year in July, five months after it was forced to stop the services by the state transport authorities.

However, the government has proposed few measures which can help the taxi aggregators to meet the demand of cabs by increasing the supply.

Firstly, it has brought down the time period, a driver is required to live in Karnataka before working for online taxi aggregator, from 5 years t0 2 years.

Secondly, the government has withdrawn the age restrictions on the vehicles to qualify as taxis. Earlier, for a cab to enter the app-based taxi service, it had to be less than 2 years old and could stay in service only until the age of six.

The government has also slashed down the license fees and security deposit amount by 50%. Now, the taxi aggregators have to pay a security deposit of Rs 1 lakh for 1,000 taxis, Rs 2.5 lakhs for up to 10,000 taxis and Rs 5 lakh for more than 10,000 taxis.

Similarly, aggregator license fee has also been halved to Rs 50,000 along with cuts on other various fees. These amounts are to be paid by the taxi aggregators although Uber had objected to this practice saying that it is only a facilitator and not he operator of taxis.

The company had also demanded a reduction in the amount of security deposit which has been accepted by the government.

In another major decision aimed towards improving the condition of drivers of such services, the government has allowed the drivers to switch between the taxi companies according to their choice.

We came to know that app-based firms were forcing drivers (permit holder) to work only for them. We have, however, recognized a driver’s freedom to choose the app he wants to associate with.

said the transport minister.

While these regulations are applicable only in Karnataka for now but soon other states may follow the suite. There has not been any official statement from any of the taxi aggregators on the new regulations.


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