Regulating Taxi-Aggregators (and why it is not all about surge pricing)

The effort to regulate the taxi aggregators sector is slowly picking up momentum. Until now, taxi aggregators (or commutechs) did not fall within the purview of the law governing taxi operators; existing laws covered only operators who hired drivers and owned vehicles..Commutechs claim that they merely connect the driver with the customers, and hence do not fall under these laws..This is about to change..In 2015, India’s Ministry of Road Transport issued an advisory for taxi aggregators [pdf]. However, since road transport is found in List II of the Constitution, State Governments are empowered to frame legislation on connected matters including taxi aggregators..Based on the advisory, a number of State Governments started rolling out their own schemes and rules. The common string running through all the new laws is the legal recognition given to the term ‘aggregators’ and the subsequent rules governing their business model..All the vehicles under each law are required to have a valid contract carriage permit issued by the transport authority under Section 74 of the Motor Vehicles Act, 1988 to operate as a taxi and each aggregator is required to have a license under Section 93 to operate as an agent..However, discrepancies and ambiguities in these new laws remain, with each state posing a different set of compliance challenges..Karnataka: The On-demand Transportation Technology Rules [pdf].Karnataka is one of the few states that have attempted to bring out clarity with respect to the rules governing cab aggregators..On April 2, 2016, the government of Karnataka notified the Karnataka On-demand Transportation Technology Aggregators Rules, 2016 (“the Rules”). These rules came into being after having incorporated the comments received from the public based on a draft submitted in February 2016..Rule 9(2) is one of the most noteworthy provisions; it states,.“In any case, the fare including any other charges, if any, shall not be higher than the fare fixed by the Government from time to time.”.Accordingly, a ban has been imposed on the existing practice of surge charge, employed by most, if not all aggregators..This “surge” pricing, which has provoked negative reactions on multiple occasions, allows aggregators to charge multiples of the standard rate during peak demand..Aggregators such as Uber, however, say that surge pricing incentivises drivers, thereby increasing the number of available taxis..The proposed “cap” on maximum rates charged, could hurt revenues..That is not all. Any violation of this rule entails a penalty of up to Rs.10,000 and cancellation of the license (which is to be applied for by the aggregator and not individual drivers/vehicles), provided the passenger complains in case of violation..However, these Rules are not about surge pricing alone. The Karnataka government has also introduced certain measures which could help the taxi aggregators such as Uber and Ola..For instance:.Time period for which the driver must be State resident reduced from 5 years to 2 yearsNo “age restriction” on how long an aggregator could stay in service (Earlier, there was a restriction of six years)Reduced security deposit (Security deposit of Rs 1 lakh for a fleet of up to 1,000 taxis, Rs 2.5 lakh for up to 10,000 taxis and Rs 5 lakh or more than 10,000 taxis)License fees cut by half to Rs. 50,000; Fees for other services too have been cut..What is yet to be seen is the form of opposition which the Rules will have to face..Maharashtra: City Taxi Scheme [pdf].In September 2015, the Government of Maharashtra had also made an attempt to regulate taxi aggregators through a draft City Taxi Scheme (“Draft Scheme”)..Under this draft scheme, every taxi fleet is required to have a minimum of 1,000 and maximum of 4,000 taxis either owned or through an agreement with individual taxi permit holders..Uber has contested the Draft Scheme’s attempt to set a cap of 4,000 vehicles per platform saying this would adversely affect the livelihoods of thousands of drivers..Just like in Bangalore, the Draft Scheme in Maharashtra also proposes to curb the practice of surge pricing by fixing the amount that can be charged by licensees..However, the State of Maharashtra is yet to see the final rules which will be notified. It is expected that Maharashtra will follow Karnataka’s policy of surge pricing as well..Delhi: City Taxi Scheme 2015 [pdf].Back in the nation’s capital, the Aam Aadmi Party in August 2015 passed the City Taxi Scheme, 2015 (“the Scheme”) thus amalgamating the previous two schemes into this latest one i.e. the Radio Taxi Scheme, 2006 and Economy Taxi scheme, 2010..While the Karnataka Rules apply to only aggregators, the Delhi Scheme applies to Individual Category, Group Category as well as aggregators. The Group Category requires a minimum of 200 vehicles and a maximum of 2,500..It is interesting to note that when an upper limit of 4,000 was set in Maharashtra, Uber vehemently opposed this limit, however not so in Delhi. That is probably because companies owning more than 2500 taxis may set up subsidiaries as told by an official from the transport department..Following the alleged rape in 2014 by an Uber driver, the Scheme also mandates the insertion of a panic button and hooter in each taxi. However, Black and Yellow Taxis, and All India Tourist Permit Taxis have been kept outside the purview of the Scheme..Among the most controversial provisions in the Scheme was the necessity to install CNG engines in all taxis being granted license under the Scheme. This particular provision has been mired in litigation before the Delhi High Court, eventually reaching the Supreme Court..The apex court had initially provided a deadline of March 31 to make the switch, but recently extended the deadline by another month..Will the Commutechs fight back?.It is inevitable..Uber, for its part, has already started generating public opinion against the new regulations..An e-mail sent by Uber to its Bangalore users claims that the new rules will put an end to the “reliable, convenient Uber you love”..Ola can’t be too far behind..Gaurav Dani, Partner, Indus Law says that some of the regulations, especially the limit on surge pricing will be challenged..He reasons,. “If airlines are allowed to hike prices in cases of high demand and low supply, why shouldn’t taxi aggregators be allowed to do the same?“