A misguided ban in Delhi

April 22, 2016 12:22 am | Updated November 17, 2021 04:50 am IST

The Delhi government’s decision to >ban surge pricing by taxi service aggregators , which follows a >similar ban imposed by Karnataka , is misguided. In Delhi’s case, the >surge pricing ban has flowed from the imposition of the odd-even licence plate rule, which has increased the demand for taxis. The >odd-even scheme may be a welcome intervention to reduce traffic congestion in the Union Territory, but the decision to clamp down on surge pricing by aggregators such as Uber and Ola, which is set to continue even after Phase Two of the odd-even scheme ends on April 30, is counterproductive. As expected, after the ban, the number of taxis plying on Delhi’s roads has dropped. Arbitrary interventions in the demand-supply market are pointless in the absence of alternative solutions. If Uber and Ola are charging their customers unscrupulous sums, the only long-term solution for the Delhi government is to provide its residents with cheaper and better public transport. The rapid growth and popularity of taxis ‘managed’ by aggregators across India is a testimony to the fact that public transport and transit facilities remain hopelessly inadequate. Surge pricing, essentially an algorithm-based mechanism that determines fares based on supply and demand, exists in slightly dissimilar forms in other areas, including that of transport. Airlines have the flexibility to raise fares depending on demand, subject to a cap. And the Railways sets aside some seats for those willing to pay more, based on the knowledge that demand generally outdoes supply when it comes to train tickets.

In general, aggregators have helped customers — with more taxi options and reduced prices. There is evidence to suggest that drivers of taxis and autorickshaws who ply under an aggregator’s brand earn more on an average than they would otherwise. There has also been substantial competition from domestic players in the aggregator market, allaying fears about monopoly operations by multinational players. Some regulations of course are both necessary and welcome. For instance, guidelines have been released by the Ministry of Road Transport to ensure that taxi commutes are safe and that aggregators cannot be owners of fleets unless registered as operators. Aggregators are part of the new economy; they use modern technology to disrupt the traditional, and often moribund, market. They have succeeded by bringing in efficiencies in both cost and convenience, which have been central to their popularity. Obtrusive regulation of these new players would work against the interests of both the commuter and the driver. Instead, governments can do more in the medium term to enhance options in terms of better modes of public transport, greater frequency of bus and metro services during rush hour and perhaps even adoption by mass transport of applications using similar algorithms to allow passengers to plan their commute better. Delhi Chief Minister Arvind Kejriwal has invested significant political capital in the odd-even scheme. Tilting at windmills will not help. A more useful intervention would have been to enhance public awareness about how these algorithms work in commuters’ favour, and at the most cap surge pricing to a predetermined multiple of the regular rate.

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