Why is Ola and Uber Auto/Cab Banned in Bengaluru?

Bengaluru has been a city where people have been able to use cars, scooters, and bike on rent as much as they want to. Ola and Uber were two apps that made it easy for people to get around the city.

On October 6, the Karnataka government issued a ban on the app-based services, citing overpricing and a lack of licensing requirements. Uber and Ola petitioned the Karnataka High Court for a stay of the ban.

On October 14, the Karnataka High Court granted auto aggregators interim relief, ordering the government and aggregators to establish a reasonable pricing system. The Karnataka State Road Transport Corporation (KSRTC) stated that "the KSRTC will work with the Government to ensure that the public has a choice and can avail transport facilities at affordable prices."

The department has stated that cab aggregators will face a fine of Rs 5,000 per vehicle if they operate three-wheelers for the first time. During the meeting, however, the cab aggregating companies decided to apply to the transport department for permission to aggregate three-wheelers in Karnataka.

Charges on Apps

As said, the Karnataka government threatened to fine app-based ride aggregators Rs. 5,000 per vehicle if they continued to operate app-based auto services in Bengaluru. The ride-hailing industry is estimated to operate over 1 lakh autos in Bengaluru, serving over 25 lakh riders per month via these apps.

An Uber representative stated, "Autos are critical to India's transportation options." "The citizens of Bengaluru have made it abundantly obvious that they value door-to-door pick-ups and round-the-clock assistance like Uber brings to serve the city's mobility needs," said the spokesperson.

Rapido previously stated that it would continue to exist in Bengaluru. "We have not lifted our base fare to 100 in Bengaluru." "During peak periods, dynamic surge is activated to facilitate customer accessibility," a company spokesperson added.

The Risk to Viability

While applauding the interim ruling, Uber argued against any potential commission or convenience fees cap when the government implements its new pricing policy. According to company executives, if the 10% commission cap is made permanent, aggregators' income will be significantly reduced.

In a statement, Uber claimed that commission caps would "threaten the viability" of the company, "affect thousands of auto drivers who depend on it for a living," and "result in the narrowing of this fledgling category." "We will continue to collaborate with the government to find ways to manage the market so that riders, drivers, and platforms can reap the benefits of technology that has genuinely molded urban mobility," the company stated.

For the government, Advocate General asked the court for more time to fix these rates in compliance with central rules.

The Modifications

While the convenience fee remains at Rs 40 per ride, the minimum base fare, which was raised to Rs 60, has been reduced to Rs 30 per ride. As a result, the basic fare for an online ride will now be around Rs 70, down from Rs 100.

However, the base charge of Rs 30 is only valid for the first 2 km. The per-kilometer rate of Rs 15 determines the fare.

The only difference between the standard booking/convenience fee and the per km fee is the minimum fare for the first 2 kilometers. Ola, Uber, and Rapido did not respond to Money control's official inquiries.

Ola, on the other hand, refused to comment on the matter. Meanwhile, a source in the state transportation department told the publication that the authorities would hold meetings with the companies and draught rules as soon as possible.

What's the Next Step?

Since the ban was implemented, many drivers have been looking for new jobs for car on rent services. While there is yet to be an official word on how long this ban might last, we can assume that some changes will be made to keep up with the competition between Ola and Uber.

For the time being, the court has given all parties involved 15 days to develop a pricing mechanism. The court also ordered the authorities to refrain from imposing coercive measures on the companies.

The High Court also authorized Uber, Ola, and Rapido to add 5% GST and a 10% convenience fee to the fixed INR 40 per ride. Auto aggregators can apply for new licenses or renew their existing ones.