Uber, Ola surge price capped; 10-hour break must for taxi drivers

Firms face penalties, including loss of licence, for violation of govt guidelines

Ride-hailing aggregators such as Ola and Uber have been brought under the Centre’s regulation, implying greater scrutiny and stringent penalties for any non-compliance related to passenger fare and labour rules like working hours of drivers. Government control over the cab tariff structure tops the list of regulations. The new norms, as per the Motor Vehicle Aggregator Guidelines 2020, have mandated a cap on surge price, preventing aggregators from charging more than 1.5 times of the base fare. 

The new legal framework would also mean a driver working with Ola, Uber or similar aggregator companies cannot be logged in for more than 12 hours in a day. There has to be a mandatory 10-hour break after working for 12 hours.  For cancellation of bookings, either by the driver or the rider, the penalty has been fixed at 10 per cent of the fare, but it cannot exceed Rs 100.

The cab aggregator stares at suspension of licence on multiple grounds —if it fails to ensure safety of its riders, if it charges higher rates repeatedly and in case it fails to comply with the contractual obligations towards drivers. If the aggregator receives more than three suspensions in a financial year, its licence will be cancelled and the aggregator will be forced to stop operations with immediate effect.

Aggregators may provide pooling facilities to only those riders whose KYC (know your customer) details are available and who will travel along the same route but with varied stoppages under a virtual contract through the app.

Key guidelines

• If driver cancels the ride after accepting it on the app, a penalty of 10% of the total fare, not exceeding ~100, shall be imposed
• If rider cancels the ride, a similar penalty shall be levied
• Cab aggregator’s licence may be suspended if it fails to ensure safety of its riders or if riders are charged higher 
• If the aggregator receives more than three suspensions within one financial year, its licence shall be cancelled
• Aggregators may provide pooling facilities to riders whose KYC details are available
• The driver shall receive at least 80% of the fare applicable on each ride, and the rest shall go to the aggregator

Female passengers seeking to avail ride pooling will be provided the option to pool only with other female passengers.

The guidelines will have a mixed impact, according to Ujjwal Chaudhry, associate partner consumer internet at consulting firm RedSeer. It is positive in terms of formalising the sector as well as increasing the consumer trust on aggregators through improved safety regulations, but there may be a negative impact on the ecosystem, he said. Capping surge and platform fee will ultimately lead to reduced earnings for 500,000 drivers (currently on these platforms) and will also lead to increased prices and higher wait time for consumers, according to Chaudhry.

Ride-hailing firms Uber and Ola declined to comment on the new government guidelines.

The Ministry of Road Transport and Highways issued the Motor Vehicle Aggregator Guidelines 2020 as per the requirements and provisions of the Motor Vehicles (Amendment) Act, 2019, and further as per the amended Section 93 of the Motor Vehicles Act, 1988, on Friday to enable the changes.

An official statement by the road ministry said, "The Motor Vehicles Act, 1988 has been amended by the Motor Vehicles Amendment Act, 2019 to include the definition of the term ‘aggregator’. Prior to the amendment, the regulation of aggregator was not available."

The business shall also be considered as a service provided by the aggregators to serve the larger public interest in terms of generation of employment and cost-effective as well as comfortable commutation facilities to the public.

Community platform LocalCircles had received thousands of complaints last year about consumers facing 5X-10X surge pricing and drivers cancelling rides on consumers all the time, said Sachin Taparia, founder and chairman of LocalCircles. Subsequently, it escalated the survey findings and issues with the Ministry of Road Transport and Highways. “It is heartening to see that most of our recommendations have been accepted and we strongly believe that they will increase consumer trust and predictability in taxi aggregator platforms,” said Taparia.

“If a consumer can have a high degree of certainty that the drivers won’t cancel their ride last minute and they will never pay more than amount X for a ride, they are bound to use the services more,” said Taparia.

Taparia said compliances to these rules may mean some short term pain for a medium to long term gain for aggregators, an equivalent to when e-commerce platforms were made liable to disclose MRP (maximum retail price) and expiry date for products on their websites and apps. “This led to an increase in consumer trust in e-commerce platforms,” said Taparia.