Karnataka plans to restrict Ola, Uber from leasing cars

The Karnataka government also wants Ola and Uber to adopt fare charts revised by the state government at regular intervals

Karnataka plans to restrict taxi-hailing apps from leasing cars on their own, potentially hindering growth plans of both Ola and Uber. It also wants these aggregators to adopt fare charts revised by the government at regular intervals.

The proposal, if adopted after a consultation process, could hurt the business of both Ola and Uber in Karnataka, especially in Bengaluru, the biggest market in the country.

Ola has a leasing subsidiary and it plans to spend Rs 5,000 crore over the next two years to add 100,000 cars on its platform through leasing. Uber has a global leasing arm, which it could potentially bring to India. Uber has partnered with Xchange Leasing to lease cars for drivers in India.

Leasing of cars allows app-hailing firms to lock drivers on their platforms for three to five years, critical for these firms to grow business at lower costs.

Karnataka notified this in its draft policy rules for taxi aggregators early this week. The rules are open for public consultations for a month. Karnataka is the second state after Maharashtra to call for public consultation of its own policy to regulate app-based aggregators.

“Surge pricing will not be allowed,” said Karnataka transport commissioner Ramegowda. Karnataka allows regular taxi operators to charge one-and-a-half times the regular fare between 11 pm and 5 am. Private taxi operators however, follow rates based on market demand.

Spokespersons of both Uber and Ola declined to comment, stating they had not seen the draft rules.

The draft rules also mandate drivers to be locals — being a resident of Karnataka for five years and knowing Kannada and another language, preferably English.

Uber claims over 40 per cent share with 250,000 drivers on its network. Ola dominates the taxi-hailing market with over 350,000 drivers. Both firms do not specify their market share or number of vehicles in individual cities.

Karnataka has cleared Rs 99 crore investment proposal of Uber that could potentially generate 100,000 driver jobs in the state.

The government also allows flexibility to drivers to work for multiple aggregators instead of locking with one provider, which would force Ola and Uber to incentivise these drivers to work within their platform.