Knee-jerk regulations to app-based cabs may end up doing more harm than good

The committee being set up by the Union transport ministry to regulate taxi operations in the aftermath of the surge pricing controversy involving app-based taxi aggregators must ensure that the new rules devised do not curb the space for innovation. The results of the August 22 deadline set by the Delhi high court to end surge pricing have not been encouraging. In place of surge pricing, the top app-based aggregators like Uber and Ola have introduced new fare rules which are not transparent, though commuters admit that fares do not exceed the Rs23 per kilometre cap set by the Delhi government. One feature of surge pricing which commuters are now missing out in the new system, which Uber has euphemistically termed as dynamic pricing, is that it does not reveal how much more customers are paying beyond the normal fare. In surge pricing, customers would be told upfront by what factor the peak-hour fare was higher than normal fares. According to Uber, the new algorithm calculates fares on the basis of distance, time, demand and supply.

The trouble with knee-jerk regulation is that they may end up doing more harm than good. The rationale for surge pricing was that it incentivised more cab drivers to be on the roads in peak hours, which consequently, also helps in driving down fares. Of course, the aggregators failed to gauge the extent of public outrage at price surges, which would climb to even four times the normal fare. If the aggregators had capped the price surges at, say twice normal fares, they would have been spared commuter opprobrium, judicial activism and now governmental intervention. To give app-based aggregators their due, their entry has made commuting a more hassle-free experience in cities. The difficulty of hailing a taxi and negotiating prices have been alleviated with these apps connecting drivers to commuters. Many people prefer the easy availability, affordability and competitive fares accorded by app-based taxis and no longer want to own cars. The popularity of app-based taxis have opened up a new employment avenue for semi-skilled youth. Even professionals are choosing to enlist on Ola and Uber, with drivers claiming earnings that range between Rs30,000 and 50,000 per month, though recent reports indicate a slump in earnings because of excess supply and fewer incentives from the companies.

App-based aggregators arrived in a business environment which was clearly unprepared for them. They began functioning without licences from state governments unlike radio taxis and simply hired drivers with commercial licenses to begin operations. Radio taxis, which have elaborate customer care centres and must be installed with GPS and fare meters, lost the pricing game to Uber. The unionised private taxi operators have been a law unto themselves and have sought to protect their turf by forcibly preventing the entry of Uber and Ola in states like Goa and at locations like airports and railways stations. The problem with the app-based aggregators became evident after the notorious Uber rape case in Delhi where a driver with a criminal record raped a 27-year-old woman executive. The company’s lax regard for vetting the antecedents of drivers on its rolls, the lack of security features on the app, and the poor customer care facilities were foregrounded in the aftermath of the case. Some of these customer care and safety issues remain unresolved and this is what the new committee must focus on rather than the regulation of fares which is best left to the market forces of demand and supply.