Karnataka Govt. Disallows Surge Pricing In Its New Policy On Commutech

The Indian government is in no mood to have tech startups, international or Indian, have their way. 

After the government issued a directive against discounts by ecommerce marketplaces, the Karnataka government has now cracked down against surge pricing on cabs that commutech apps like Uber and Ola regularly employ at the pretext of offsetting high demands. This move is sure to delight the customers that frequently complain about the high surge fares on rides, but could hit the revenues of the commutech players.


Image: OfficeChai

| “The fare and other charges, the policy says, cannot be higher than the fare fixed by the government from time to time. Which means the app firms must charge a fare within a band the upper limit of which is capped.” |

“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,” Transport Minister Ramalinga Reddy told ET. 

However, the new policy isn’t all about making things difficult for the commutech companies. It includes a few directives that are driver friendly and may make it easier for these companies to recruit more drivers, hence increasing the cab supply to fuel demand. For starters, anyone with a valid licence and living in Karnataka for two years can drive a cab for an app service like Ola or Uber. Also, Taxi permit holders can switch between ride hailing apps as per their choice. Additionally, in response to Uber’s concern about the high costs associated with registering as a cab aggregator, the government has also halved the registration fees and the security deposit required to start business. 

Keeping the customer friendly overtone implication of this policy intact, the govt. still mandates the cabs to have a “panic button” inside the car, following incidents of sexual harassment and safety issues in the past.

This new policy on cab aggregator apps may come across as a piece of good news for the customers, but the cab companies are likely to be frowning as surge pricing helps offset the low fares offered by them and could be the difference between their profits and losses. We reached out to Uber, but they have refused to comment on the issue.

Bangalore is the biggest market for both Uber and Ola, and regular interventions by the Karnataka government impact their services. Recently, the government had declared the bike taxis business model illegal and seized many of Uber’s bike taxis in the process. Shuttle bus operators like Zipgo and Ola are not allowed to ply either.

It’s hard to say if the Karnataka government is trying to achieve a fair, well balanced ecosystem in India’s startup capital in the wake of the PM Modi-driven Startup India movement, or actively trying to discourage it with its seemingly draconian policies.