Transport Ministry Caps Ola, Uber Fees At 20% Of Total Fare, Limits Surge Pricing
Signage for digital payment service Ola Money, operated by ANI Technologies Pvt., is displayed on the window of a taxi in Bengaluru, India. (Photographer: Dhiraj Singh/Bloomberg)

Transport Ministry Caps Ola, Uber Fees At 20% Of Total Fare, Limits Surge Pricing

Cab aggregators in India can only draw a fee of 20% of the fare applicable on each ride, and the surge price has been capped at 1.5 times the base fare, as the Transport Ministry brings ride-hailing apps under a regulatory framework for the first time.

The app-based cab aggregators have been brought under the Motor Vehicles Act 2019 to regulate shared mobility and reduce traffic congestion and pollution, make the service providers accountable and responsible for their operations, while ensuring customer safety and driver welfare, according to guidelines issued by the Union Road Transport and Highways Ministry—a copy of which has been reviewed by BloombergQuint.

“These will provide a guiding framework to the state governments/union territories to consider for issuance of licences as well as regulating the business being conducted by such aggregators,” the ministry said.

An aggregator, the statement said, will be allowed to charge 50% lower than the base fare and the maximum surge pricing cannot be more than 1.5 times the base fare.

Earlier, a survey by Local Circles, a community-based social network, showed that ride cancellation and surge pricing are among the biggest issues faced by consumers using such app-based cab aggregators. The platform in September last year had also written to Transport Minister Nitin Gadkari seeking surge price to be capped at around 25%—BloombergQuint has seen a copy of the letter.

According to the government’s latest guidelines:

  • The driver of a vehicle integrated with the aggregator shall receive at least 80% of the fare applicable on each ride and the remaining charges for each ride shall be received by the aggregator.
  • The city taxi fare indexed by WPI for the current year shall be the base fare chargeable to customers availing aggregator service. In states where the city taxi fare has not been determined by the state government, Rs 25-30 shall be the base fare for the purposes of fare regulation.
  • A cancellation fee of 10% of the total fare, not exceeding Rs 100, has also been set for both riders and drivers.
  • The state government may by way of a notification direct 2% over and above the fare towards the state exchequer for amenities and programmes related for aggregator operated vehicles.

Also, an aggregator licence can be suspended if...

  • There is ‘systemic failure’ to ensure the safety of the rider and the driver
  • Repetitive instances of financial inconsistencies with regard to the fares charged to riders
  • Unjustified imposition of surge pricing
  • Effect on driver welfare and livelihood due to violation of contractual obligations, among others.

A taxi licence is granted to be valid for five years. But while onboarding drivers, they should have a minimum of two years driving experience or 15-day driver training facilitated by an aggregator.

State governments will have to follow the guidelines issued by the centre while issuing the licence to an aggregator.

The cab aggregator is also required to establish a control room with 24x7 operations and ensure that all the vehicles, on the direction of the aggregator, maintain uninterrupted contact with the control room.

Other Highlights From The Guidelines

  • Aggregators may provide pooling facilities to riders whose details and KYC are available who shall be travelling along the same route but with varied stoppages from one point to another under a virtual contract through the app.
  • Female passengers seeking to avail ride pooling shall also be provided with the option to pool only with other female passengers.
  • Data generated on the app to be stored on a server in India and such stored data shall be for a minimum of three months and maximum of 24 months from the date on which such data is generated

Cab aggregators Ola and Uber have yet to respond to BloombergQuint’s emailed queries.

According to Redseer Consulting, the guidelines shared by the government will have a mixed impact. “While it’s positive in terms of formalising the sector, overall, the impact on the ecosystem growth will be negative as capping surge and platform fee will ultimately lead to reduced earnings for five lakh drivers,” Ujjwal Chaudhry, associate partner consumer internet at the management consulting firm, said.

The move, Chaudhary said, will also lead to increased prices and higher wait times for the six-eight crore consumers who use it for their mobility and commute needs.

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