Acting on Karnataka Government’s not-so-well-received order of banning surge pricing by cab hailing companies within the state, Uber has filed an objection against state Government decision. The pricing mechanism is employed by Uber globally, and by Ola in India, according to which the companies charge higher fares for rides during peak demand hours.
Under surge pricing, the price per ride for the same distance varies depending upon the demand on the cab at that instant. So, if you wanted to hail a ride at a time when more people were travelling — say at 10 AM in the morning, when folks start leaving for offices and schools — you will be charged more than at, say 2’O clock in the afternoon.
However, the scheme didn’t go down well with the Karnataka government, who said that companies must stay within the price bands specified by the government. Speaking on the topic, Transport Minister Ramalinga Reddy had told ET,
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.
Meanwhile, Uber defended its decision by stating that “surge pricing means you always have the choice to get a ride when you need one.”
The company has also complained about the Karnataka government’s continued insistence to curb surge pricing and stick to a fixed price band, and has filed an objection against the law. Speaking on the topic, Bhavik Rathod, general manager of Uber South said,
The government of Karnataka has shown immense support for businesses that harness technology and innovation and we are hopeful of progressive outcome.
The government has been helpful no doubt, dropping the age restrictions it had in place regarding the age of a taxi before it could join a cab hailing service, for example so as to increase the supply of cabbies. However, it has put its foot down this time.
Surge pricing is directly a result of the recent cuts in Uber and Ola fares. Thanks to the said cuts, both the companies have received a spike in numbers. The companies are now trying to capitalize upon that by raising the fare to as much as five times the normal values.
However, it will have a tough time getting past the government on this one, who is quite firm on not allowing fluctuating price schemes, despite Uber’s insistence that most of the extra fares will go to the cabbies. The Karnataka Transport ministry is even now considering tighter implementations of he law to ensure that surge pricing — which reportedly, has been continuing despite instructions to the contrary, is checked in the state.