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Fighting the apps

Karnataka unwise to shut down Ola, Uber

Business Standard Editorial Comment  |  New Delhi 

The confrontation between the government of Karnataka and the big taxi-hailing apps - Uber and Ola - is coming to a head. In the process, both consumers in Bengaluru and the tens of thousands of drivers who depend on Uber and Ola for their livelihoods face an uncertain future. Over the past week, extensive anecdotal evidence emerged of harassment of those drivers, as well as hefty and arbitrary on-the-spot fines. Hundreds of cab drivers staged wildcat protests across the city, including at Devanahalli toll plaza and Freedom Park. Both Uber and Ola drivers have gone to the courts, which on Wednesday directed the transport department to stop randomly impounding cars.

The Karnataka government denies it has banned taxi aggregators. It says that it has issued a policy for them, and licensed aggregators can continue operations. But the Karnataka On-Demand Transportation Technology Aggregators Rules, 2016, which were issued in early April, are a de facto ban. They do not take into account the nature of the cab aggregating platform at all. For one, they demand aggregator "fleets" have taxi signage on the vehicle. But several Uber and Ola drivers also operate as private cars for hire, which do not have taxi signs. The point of the app is to allow the driver that flexibility. The Rules also demanded GPS in each car. This is a pointless demand since the apps are designed for GPS-enabled smartphones, so there will automatically be GPS in the car. They also wanted digital meters in each car, which again is redundant, since it is the app that calculates the fare.

But the most problematic aspect of the demand is a clause that "the fare including any other charges, if any, shall not be higher than the fare fixed by the government from time to time". So the freedom to use the price arrived at by the taxi aggregator's algorithm has been taken away from drivers and passengers. This destroys the "surge pricing" mechanism. What "surge pricing" does is to indicate to drivers where in the city the greatest demand is, and encourages them to drive there to pick up a passenger. The exact mechanism by which the exact surge multiplier is arrived at is not that important; what matters more is that it allows demand and supply across various districts of the city to come into play, and vastly increases utility. Shutting down this mechanism will render the system grossly inefficient, inconveniencing customers - and it will deprive drivers of extra revenue.

Finally, one particularly pernicious rider is noteworthy: that a taxi driver must be a resident in Karnataka for five years, and should be able to speak Kannada. Such restrictions on the private sector are never a good idea - any such nativist regulation should be strongly opposed. Knowledge of the local language may be an added advantage, but it cannot be a condition in a city that claims to be a metropolis with a mix of population from across the country and indeed from different parts of the world. This add-on to the Rules enhances the impression that they are designed mainly to protect powerful local taxi unions. The Karnataka government should withdraw its attempt to shut down the aggregator apps - and no other city should be tempted into following in Bengaluru's footsteps.

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First Published: Thu, June 02 2016. 21:42 IST