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Karnataka Govt impounds Ola and Uber cabs for surge pricing

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The Karnataka government has seized cars from online cab aggregators Ola and Uber for charging their users over the government decided rate of Rs 19.5/km, reports Mint. The report cited Dr Ramegowda, Bangalore’s transport commissioner, as saying that over 30 cars had been impounded for implementing surge pricing. We’ve reached out to Uber and Ola as well as the Karnataka transport department and will update this when we hear from them.

Surge pricing is a technique used by both Uber and Ola to increase fares (1.5x, 2x etc.) to provide drivers the incentive of keeping their cab running, while also making it available for the user, no matter how much the demand for one.

Government stays cab rate at Rs 19.5/km
Earlier this month, the Karnataka government banned surge pricing, as a part of its rules for online cab aggregators in the state. According to the ET report, multiple cab operators like Uber, Ola, Meru, Mega, Bangalore Taxi etc operate under the Radio Taxi Scheme and not the ‘Karnataka On Demand Transportation Technology Aggregators Rules, 2016’.

Surge pricing backfires
Last week, Uber put up a blog post explaining the need for surge pricing, reiterating what it has been saying since inception: surge pricing allows users to get cabs even on a busy day. However, users haven’t been happy. Most recently, a user saw prices as high as 7.3x in Hyderabad making it impossible for him to get a Uber cab. Despite this, the company states that ‘nearly all’ of surge pricing profits go to the drivers as part of their fares. Aman Garg and Nitish Parnami from Bangalore and Delhi, also started petitions against Ola and Uber on Change.org to address surge pricing, for which both got over 16,000 and 51,000 signatures respectively.

MediaNama’s take: Impounding cars does not help in stopping surge pricing. Since online cab aggregators call themselves tech companies and not transport companies, almost all of their consumer facing operations function via a cell phone. We certainly hope that Ola and Uber help their drivers to get their cars back and engage with the authorities on surge pricing and the government’s rules.

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I would also like to question the implementation of surge pricing, even during common non-peak traffic times like Wednesday afternoon or Sunday night. In fact, I’ve even seen surge pricing on cars on Uber when ‘no cars were available’. There’s very little transparency other than the statement that “demand is high” and “surge pricing is active”. Users of the services could certainly benefit from more transparency, given that the app’s function for a user is getting a car ride, not dealing with inexplicable rates for a car ride.

Fare cuts
Last week, Uber slashed its rates for its cheapest service UberGo in 10 non-metro cities in the countries. Fares in Jodhpur and Udaipur were cut by 22%, Mangalore by  20% and Ajmer and Trivandrum by 18%. In February, Ola introduced Ola Micro in Mumbai which would offer rides at Rs 45 as base fare and Rs 8/km following that.

Image Credit: Thomas Hawk under CC BY NC 2.0

Written By

I'm a MediaNama alumna from 2015-16 (remember TinyOwl?) now back to cover e-services like food and grocery delivery, app based transport and policies, platforms and media in India.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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