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Centre may cap surge pricing for Uber, Ola at 3x of the base fare

Cab aggregators like Ola and Uber will likely be permitted by the Centre to charge customers up to 3x the base fare during peak hours.

Cab aggregators like Ola and Uber will likely be permitted by the Centre to charge customers up to 3x the base fare during peak hours, according to a senior government official aware of the discussions on a new set of rules and regulations being drafted for the industry. Ride-hailing apps, including Ola and Uber, have long argued in favor of hiked pricing to regulate the supply and demand of cabs on their platforms.

The set of guidelines is yet to be framed will specify the cap on such price hikes and will be in terms with the December 2016 proposal of the Central government. “Surge pricing is intrinsic to the demand and supply situation. Like with the December 2016 guidelines, our policy will mention surge pricing and what should be the kind of cap, among other things.”, the official told ET,

The policy proposed will follow the new motor vehicle law which would recognize cab aggregators as digital marketplaces for the first time. Previously, the rules did not accept these ride-hailing platforms as separate entities, forcing companies like Ola & Uber to operate in a grey zone.

The states leeway to alter the regulations

The official added that the new rules will be applied to cab aggregators nationwide and will also give the states room to make modifications if they come up with valid reasons.

Karnataka, for instance, has set the maximum surge pricing capped at 2.25 times for luxury cabs and 2 times for small cabs. According to a LocalCircles survey, 39% of the 51,000 respondents answered their foremost issue with cab aggregators was high pricing. As many as 49% said high pricing should be capped at a maximum of 25% of base fare, while the 45% said it should be banned altogether. The cab aggregators, however, argued that hiked pricing encourages the drivers to cater to the areas with high demand.

Experts believe that cab-hailing has become an essential part of urban commuting in India, especially in large metropolitan areas. While hiked pricing is the most efficient way of dealing with high demands, experts claim that India should take a lesson from global marketplaces before framing laws for the sector.

“We need to see what has happened in London, New York, and California in terms of policies regulating cab aggregators. India is in a good position to understand what has happened in this (cab-hailing) industry globally, and frame rules accordingly.”, a senior adviser of one of India’s giant taxi aggregators stated off-record.

The new guidelines on pricing, the regulations are also expected to address safety issues, in particular, women passengers, after the Supreme Court had asked the Centre to come up with new rules on this. The government could also consider regulating the type of vehicles that can be used by cab-hailing platforms.