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Why Magic Sewa filed a petition against Ola & Uber for surge pricing


Rakesh Agarwal, CEO of Magic Sewa, an online aggregator of cabs in Delhi-NCR, told MediaNama in a phone conversation that app-based taxi fares were dropping (more in point 1), the number of vehicles on the road was increasing, but demand was not increasing in that proportion. Despite this, surge pricing was being used frequently, with a higher margin and proportion, Agarwal added.

This led Agarwal to file a petition against app based cab aggregators which were violating the Section 67 of the Motor Vehicles Act (MVA), 1988, by implementing surge pricing. The Delhi High Court’s hearing (Case number W.P.(C)  3114/2016) is awaited.

MediaNama has a copy of the petition which states that the ‘unlawful practices (surge pricing etc.)’ adversely affected the livelihood of Magic Sewa employees and that the company’s survival was at stake. The petition adds that a Magic Sewa employee also lodged 3 complaints against the aggregators for overcharging, but ‘no fruitful action has been taken’. Interestingly, instead of an online vs offline fight, this time an online cab aggregator has filed a petition against its peers.

Why did Magic Sewa file the petition?

1. Advertised prices cheap: Agarwal says companies were advertising fares of Rs 5-6/km, which were previously Rs 8 and 10/km, but despite adding more cabs and surge pricing to their mechanisms, app based aggregators were struggling with demand, and making users pay huge amounts for a cab ride. He said that users had ended up paying anywhere between the advertised Rs 5/km to Rs 38/km using ‘unlicensed taxi aggregators’ services.

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2. Aggregators deciding on fare violates Section 67 of the MVA: Agarwal alleges that Uber and Ola were selling ‘their standard stuff at a loss and surge pricing was a ‘mischievous’ (way) of cost or loss recovery mechanism’. He adds that price fixing of autos and taxis lies with the government, and every state government or RTO decides the fare for autorickshaws and taxis. “In case of app based aggregators, the aggregators were deciding the fare. We believe in a free market economy where the player needs to decide the price for their goods and services, but the existence of the law needs to be honoured, and aggregators are not doing it, thus violating Section 67,” he said.

3. Drivers full time professionals in India: Agarwal said that in the US and in Europe, private doctors, CAs, engineers, or those in other services drove Uber to make extra money. “In India, you need to have a commercial license and a yellow plate vehicle to drive for Uber or Ola. It is the drivers’ source of livelihood and surge pricing will not do anything to bring more drivers on the road. In Europe and the US, private drivers need incentive to come onto the roads during heavy demand, in India, drivers are already on the road,” he explained.

The case was first heard in the Delhi High Court on 8 April and the Delhi Government has been directed by the high court to file its status report on 25 April.

Airport Authority case: Incidentally, Magic Sewa has also alleged that Airport Authority of India (AAI) and Delhi International Airport Ltd (DIAL) were giving ‘preferential treatment’ to taxi operators Easy Cabs, Meru and Mega Taxi at the Delhi airport by waiving the Rs 150 entry fee, while imposing it on other cab operators. The Bench disposed of the appeal (LPA  241/2016), while the AAI counsel said that it had floated tenders for granting special privileges and that the 3 cab companies were charged huge amounts for entry into the airport. Another appeal (W.P.(C)  1585/2016) is scheduled to be heard on 22 July.



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Also read:
Ola and Uber suspend surge pricing in Delhi following govt warning
Delhi Govt to impound cab aggregator vehicles for flouting rules

Image Credit: Counselman Collection under CC BY SA 2.0

*Edit: The headline and the story have been updated for clarity. 

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