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State government to put a cap on Ola, Uber surge pricing

The transport department has found that the cab aggregators surged prices even at odd hours.

  • Published: April 25, 2018 6:40 PM IST

It is well-known that availing a cab service during peak hours or festival time equals to surge in prices as much as 10 fold. To put an end to the woes of commuters, the state is reportedly looking at capping the surge fare by cab aggregators such as Ola and Uber.

As TOI reports, the state is also looking at legal options to keep the surge prices under check. Recently, the state transport department wrote to the Ola aggregator ANI Technologies Private Ltd and Uber India seeking a copy of their policy regarding fixing of surge prices. The department put certain crucial questions forward such as surge pricing during natural calamities, which is when the need for support is at its peak.

In defense, the cab aggregators have claimed that the surge pricing is calculated by an algorithm when there is a mismatch of demand and supply. The surge price acts as an incentive for the drivers to earn more than the usual. According to these aggregators, these rates are revised based on the demand-supply gap, and this surge pricing lasts only for a few minutes.

However, commuters have complained of surge pricing persisting throughout certain days.”Surge pricing is not always transparent and difficult to explain. Having a maximum cap on surge pricing to the extent of 2.5-3 times may be logical as it will help protect the interest of both the operator and consumer. It is not very difficult to implement as their technology is great. There is no need for calibrated meters to be installed,” a senior transport department officer is quoted as saying in the report.

It is not only the commuters who have experienced the surge in prices. The transport department has also randomly checked fares at different areas and times, especially during uncertain weather conditions such as rain and storm and discovered the rates were too high.

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“Surge price can’t be elastic beyond limit. There are chances of manipulating the situation by going off the system collectively to create a massive demand-supply gap and engineer a surge pricing. Here, the aggregators have a role to play,” an official is quoted. To this, a corporate affairs head of an unnamed aggregator said that the surge pricing acts as an incentive for the cab driver and how else would a commuter convince the driver to take you to a destination during the most trying times.

The transport department has found this explanation not justifying the surge pricing witnessed by commuters even at odd hours when there is no surge in demand or when there are no natural calamities. “Uber and Ola have stopped incentives they were offering their drivers. There is no dearth of cabs as we have issued enough permits. The supply may have gone down as many drivers opted out of the service. This, seemingly, has resulted in surge pricing. Also, if there are many commuters at a particular destination, the surge is easily triggered,” the official said.

The development comes at a time when both Ola and Uber, who have the same investor, are mulling a merger. Uber CEO Dara Khosrowshahi recently said that India is one of the most important markets for the company and it will do all that it takes to sustain the business here. Ola, which is homegrown, is speculated to absorb Uber’s business in India, which will see the competition dying between the two services.

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  • Published Date: April 25, 2018 6:40 PM IST