Uber, Ola face the heat in Maharashtra, too

Move that aims to bring in transparency in pricing will benefit consumers but hurt aggregators

Maharashtra is all set to follow in the footsteps of Karnataka to bring taxi aggregators like Uber and Ola within its ambit for fare fixation and curb surge pricing.

The state’s transport department has submitted its proposal to the government. The move will benefit consumers but hurt aggregators.

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On Wednesday, Karnataka became the first state to introduce a formal set of rules governing taxi aggregators.

‘’The fare will be decided on the cost of the vehicle and the engine capacity. The transport department will enjoy powers to cancel licences for non-compliance,’’ a Maharashtra minister who did not want to be named told Business Standard.

He added the proposal had been sent to the government.

Maharashtra’s proposed rules for taxi aggregators will go beyond Karnataka’s by introducing an induction schedule for taxis, where only 25 per cent of the fleet can be acquired at the time of being granted the licence, 50 per cent in three months, 75 per cent  in six months and 100 per cent in a year. The move could put driver partners of Uber and Ola out of work for months.

“It is good for the government to come out with some norms and have a pricing range to make it more transparent,” said TV Mohandas Pai, co-founder of Aarin Capital and a prominent Bengaluru citizen. “I think more states should look at this and pick it up,” he added. The Centre had released a progressive set of consultation guidelines for taxi aggregators. Prime Minister Narendra Modi recently inaugurated the use of e-rickshaws on Ola’s platform.

NEW RULES

• The move will introduce transparency in fares and end surge pricing practices
• Fares for cabs will be fixed based on the cost of the vehicle and engine capacity
• Maharashtra plans to regulate the number of cabs on each platform with an induction schedule
• Fixed fares will not allow Uber and Ola to undercut costs of rides, hurting their growth plans
• Mumbai and Pune are among the largest markets for both Uber and Ola in the country

Delhi, which is struggling with pollution, has turned to firms such as Uber and Ola to help get vehicles off the roads. In January, they introduced ride-sharing services, they faced no resistance from the Delhi government, whereas several other states, including Karnataka, had raised red flags.

If more states go in for regulation of prices, Uber and Ola could be in trouble. The firms have pledged to invest $2.25 billion (Rs 15,000 crore) over the next few years in India. Functioning on asset light models, most of the money is being spent on undercutting and acquiring customers.

RedSeer Management Consulting, a research and advisory firm that tracks online businesses in India, estimates that the taxi hailing market in India was $1-1.2 billion (Rs 6,600-7,900 crore) in annual gross booking value in February 2016.