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Tag Archives | ola

Karnataka vs. Cab-Aggregators (Part II)

By Anupam Manur (@anupammanur)

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In order to obtain a licence, cab-aggregators have to replace their present efficient technology with an outdated one. The requirements to obtain the licence are archaic and simply untenable. 

In yet another blow to cab aggregator companies in Karnataka, the State Transport Department issued a statement asking cab aggregator companies which have not obtained the necessary licences to stop operations immediately. “Web-based aggregators had to obtain licences to operate cabs and taxis. But many aggregator companies have not obtained licences, but are operating such cabs. This is a gross violation under sec-93 r/w 193 of the Motor Vehicles Act. Hence, companies which have not obtained licences from the concerned authority should stop operations with immediate effect otherwise strict action will be taken against such operators,” the statement said.

It does feel a bit retrograde to ask companies to stop functioning for not having obtained the appropriate licence. It does remind one of the pre-1991 days. However, the immediate counterbalancing reaction would be to wonder why would the cab companies refuse to obtain a licence. What exactly is preventing them from getting a licence, which can keep them in business in their largest market – Bangalore. So, I wanted to know what does it entail to obtain a licence to continue as a cab aggregator.

This particular section (sec-93 r/w 193) of the Motor Vehicles Act specifies that “No person shall engage himself as an agent or a canvasser, in the sale of tickets for travel by public service vehicles or in otherwise soliciting customers for such vehicles, without a licence from the proper authorities”. This bit seems more relevant for KSRTC ticketing agents and not on-demand cab aggregators operating over a mobile app.

For further clarity, one needs to look at the The Karnataka on-demand Transportation Technology Aggregators Rules, 20 I 6, which was released on 2nd April 2016. It starts off by quoting the original section 93 that a licence is required to operate as a cab aggregator and then goes on to specify the requirements for obtaining the licence.

The requirements are specified for the aggregator company, the driver, and the vehicle. The company has to pay a licensing fee of Rs.50,000; keep a security deposit of Rs.2,50,000; have a minimum of 100 cabs in their fleet, has facilities for monitoring the vehicles via GPS, etc. The driver should have a driver’s licence, minimum driving experience of two years, be a resident of Karnataka for a minimum period of two years and have a working knowledge of Kannada among other things.

All of these requirements seems fairly reasonable and should not act as an impediment for Ola or Uber to obtain a licence. It also seems that the regulators have understood how cab aggregators work, until of course, they get to the specification for the vehicle. When describing the requirements of the vehicles, the Act goes back to the classic 1970s Licensing Raj days. All cabs should be fitted with an yellow coloured display board with words “Taxi” visible both from the front and the rear. The board shall be capable of being illuminated during the night hours. The driver’s licence and photo should be displayed clearly in the vehicle. As of now, the app takes care of that.

The part of the Act that betrays the fact that the regulators temporarily time travelled to the 1970s is the demand for every vehicle to have a meter which displays the fare along with a printer that can provide a printed copy of the final amount to be paid along with the breakdown of the fare. While specifying this, they truly embraced red-tapism, in all its glory, and specified the font size for the bill to be printed in, print width, print speed, resolution, among other things. They have also given extremely detailed specifications of the GPS/GPRS capable vehicle tracking unit (including temperature range and humidity of the device).

Some of the specifications for vehicles operating under cab-aggregators.

Some of the specifications for vehicles operating under cab-aggregators.

Asking an app-based cab aggregator company to install a bill printing device in the car, a large display monitor that shows the route, fare, and other details, to have a taxi sign on top, etc seems to be retrospective in nature, since all of this is done more efficiently by the respective apps. By demanding Uber and Ola to obtain licences by adhering to these specifications is forcing them to replace their more efficient technology with an outdated one.  By doing so, the regulators are only betraying their ignorance of how a cab-aggregator functions. I would strongly urge them to download the Ola app today, take a ride, understand how it works and then come up with regulations that wouldn’t throttle the businesses.

Anupam Manur is a Policy Analyst at the Takshashila Institution.

(Part I was regarding limiting Surge Pricing and my article on that can be found here).

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Why the new Geospatial Information Bill, 2016 is a death knell for start-ups?

The draft Geospatial Information Regulation (GIR) Bill 2016 recently introduced by the government is complete bad news for Start-up ecosystem and will lead to a license-quota-permit raj 

The government of India, ministry of home affairs recently released a draft bill on geospatial information regulation and invited comments from the public. The reason given by the government is that Pathankot attack in January was due to the precise location being known by the terrorists and that the bill addresses the question of national security. The bill recommends a fine up to Rs. 100 crore and a jail term up to seven years if the map of India is depicted wrongly.

Governments have every right to frame laws to safeguard and enhance national security. The bill has been on the agenda of the Indian government since 2012. The main concern of the government seemed to be Internet giants like Facebook, Google, and Microsoft etc. According to the draft bill, it will be mandatory to take permission from a government authority before acquiring, publishing, disseminating, or distributing any geospatial information about India. It also specifically states that the government will set up a Security Vetting Authority (SVA) in a time bound manner. Where the bill gets it wrong is creating a negative atmosphere and unnecessary roadblocks for start ups.

Amitabh Bagchi, a professor at IIT Delhi, says that companies like Google and Microsoft are at the lowest end of an application stack that may consist of several layers.  Multi billion dollar companies like these get the information available through the Application Programming Interfaces (APIs). In December 2014, the Survey of India, the central government’s nodal agency for maps reported that map of India is wrongly depicted by Google in its websites like google.co.in, ditu.google.co.ch (China), google.pk (Pakistan) and google.org (general).

The ones who are likely suffer the most are Start-ups that heavily depend on geolocation services. Companies like Zomato, Swiggy, zop now, gropeher etc have their successes pinned on to the location. In addition, Bangalore based start ups like MapUnity and Latlong that create apps for businesses are genuinely afraid that it will kill them. Big companies like Ola and Uber do not get affected that much. They are big enough to tide over crises. It is the small companies that have every reason to be apprehensive. The timeline for government approval could be up to three months, a luxury which cannot just be afforded by the start ups. Therefore they have come up with a website titled Savethemap.in that informs the user about the bill in the frequently asked questions (FAQ) section. A good public policy is one in which all stakeholders are consulted rigorously and their concerns addressed.

Guru Aiyar is Research Scholar with Takshashila Institution and tweets @guruaiyar

Featured Image: Geomap by Caulier Gilles licensed from Creativecommons.org

 

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A Ban on Surge Pricing will Create Shortages

By Anupam Manur (@anupammanur)

Instead of a price ceiling on cab prices, the government should look at all the ways in which it can increase the travel options within the city.

Karnataka’s Transport Minister Ramalinga Reddy recently unveiled a new policy to regulate cab aggregator services such as Uber and Ola. While Karnataka previously had a policy to regulate regular taxis as ride-hailing services under Radio Taxi Scheme, 1988, Uber and Ola were not covered under the law, as they were aggregator services and not companies that own and operate vehicles for hire. However, as the app-based on-demand cab aggregator companies became increasingly popular, the government sought to bring them under the regulatory ambit.

The policy has introduced a few concessions for the cab aggregators, in a move to increase the supply of cabs. They have dropped the restrictions on the age of the vehicles, reduced the number of years that a driver had to be a resident in Karnataka from five to two, and has allowed drivers to switch between the ride hailing apps, as per their choice. They have also halved the license fee and security deposit. All of these moves will benefit the companies and the customers alike.

However, the biggest policy that will have a detrimental effect on the state of urban transport in Bangalore is the decision to disallow surge pricing for these companies. Both Uber and Ola use an algorithm to determine the prices based on real time demand and supply. If the demand for cabs were considerably higher than the supply, then the app would tell the customer that prices have surged. The surge pricing not only reduced demand, but is also a tool to increase the supply. A higher price will automatically incentivise more drivers to go to the area with surge pricing. However, the surge prices can, at times, be quite ridiculous, which is what caught the authorities’ attention. On New Year’s Eve, for example, Uber had a surge pricing of 10X, that is, ten times the normal amount.

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Effectively, the government has put a price ceiling on what these companies can charge the customer. It has given a band with a fixed upper limit, within which the price charged to the customer has to fall. While, this might seem like something to cheer about for the customer at the first glance, a closer inspection will reveal that it will actually end up hurting the customer as well as the companies.

Price ceilings simply do not work, as economic history has repeatedly taught us. A price ceiling will simply create a shortage in the supply of the good in question and create distortions in the market, which will hurt the very customer that such laws are intended to protect. In this case, a ban on surge pricing will lead to a reduction in the number of taxis available in the market, thereby creating welfare loss to the customers who demand the taxis.

The supply of any commodity depends on the price. At each price point, a supplier (driver in this case) will decide whether it is profitable to sell at that price point. Auto rickshaws normally charge 1.5X from 9PM – 6AM, in a bid to be compensated for working late hours and at times that other would not be willing to. Imagine if a similar price cap had been put in place for autos, there wouldn’t be any autos available for hire after 9PM.

Similarly, during peak hours and other times of high demand, in the absence of surge pricing, an Uber driver would not consider it worthwhile to switch on the app or accept ride requests and thus, leading to shortages.

Another major impact of this ruling would be that Bangalore would lose out on the new investment that these companies had pledged. Uber, which has now partnered with 30,000 cabs in the city had planned to expand to about 1,00,000 cabs in the next few years. Uber and Ola combined had pledged to invest around Rs. 15,000 crores in the next few years in Karnataka. With regressive laws such as this, the state could easily lose this investment to neighbouring states. The other worry is that other Indian states could follow this bad example. Maharastra was considering a similar move and it could get buoyed by the Karnataka move.

Finally, the government must rethink whether this is the best method to achieve its objectives. The intention behind this move is to increase the supply of public transport at affordable rates for the consumers. Instead of creating distortions in the market by implementing a price cap, the government should look at other ways to make the market more competitive and remove entry barriers. The government could consider allowing flag down taxis on the streets, like they have in all other major metros in India, which will surely increase the supply of taxis. It could also allow shared autos to ply on Bangalore roads for fixed routes, which will ease the demand for taxis. Another related measure is to allow private busses of all sizes on Bangalore roads, which is currently disallowed. In short, the government should look at all ways to improve public transport in Bangalore and ways to increase the number of options available for customers to travel in the city. This will surely reduce the excess demand for Uber and Ola, which will automatically make surge pricing redundant.

Anupam Manur is a Policy Analyst at the Takshashila Institution.

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