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Cab Aggregators Have To Cap Surge Pricing In Karnataka

Karnataka High Court upholds state’s right to set rules for cab aggregators

 A driver for the Uber Technologies Inc. ride-hailing service (Photographer: Dhiraj Singh/Bloomberg)
A driver for the Uber Technologies Inc. ride-hailing service (Photographer: Dhiraj Singh/Bloomberg)

Taxi aggregators in Karnataka have to abide by the rules set by the state government. The Karnataka high court which was hearing a plea filed by Uber India Technologies Pvt. Ltd, upheld the state government’s right to frame these rules under the Karnataka On-demand Transportation Technology Aggregators Rule, 2016.

The judgement also effectively means that the cab aggregators have to cap their surge pricing model.

This means that while taxi aggregators like Ola and Uber can still use the surge pricing algorithm, but it cannot exceed the Rs 19.50 per kilometre cap fixed by the state government, including wait time charges.

The Karnataka state government had on April 2, 2016, made it mandatory for ride-hailing services to get a permit before operating in the state, a move that was challenged by San Francisco-headquartered Uber Technologies Inc’s India subsidiary Uber India Technologies Pvt. Ltd, questioning the state’s authority to frame such rules. It now has one month to secure the licence, while its peer Ola has already been licenced to operate in the state in June this year.

In a 260-page judgement Justice Raghavendra S Chauhan held that the state government is well within the right to frame rules under the sections of Motor Vehicle Act, 1988. The court also said that the state should encourage and promote the interests of the startups in the taxi space.

As per the rules upheld by the court for the licence, the aggregator should have a fleet of minimum 100 taxis, either owned or through an agreement, all taxis should be fitted with a panic button, and there should be thorough verification of the drivers, for the last seven years. The rule also said that the drivers should have a working knowledge of Kannada and the taxis should have an illuminated display board with ‘Taxi’ written on it.

The court also maintained that a criminal complaint filed against a driver cannot be used to cancel or suspend the aggregator’s licence.

Uber and Ola did not respond to an email seeking comment.

Tough Times Ahead

Ride-hailing services are already facing regulatory challenges in Maharashtra, while state governments in Delhi and West Bengal are in the process of framing their rules. The central government is also expected to come up with guidelines for cab aggregators soon.

Cab aggregators in Maharashtra have already opposed the new draft regulation by Maharashtra government. The draft regulation has proposed a permit fee of Rs 25,000 for vehicles with an engine capacity of less than or equal to 1400cc and Rs 2.61 lakh for vehicles with a higher engine capacity.