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Surge pricing isn't the issue PDF Print E-mail
Friday, 15 April 2016 03:55
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Shobhana edit

If auto/taxis went by the meter, Uber fares would fall

 

In a not-so-surprising move, Karnataka’s transport department has banned Uber from resorting to surge pricing, an automatic rise in fares when demand for taxis overtakes the number of cabbies in the vicinity, typically during rush hour. In its defence, the taxi-aggregator has pointed out that any increase in fares benefits both drivers and passengers; more drivers are inclined to come out on to the roads to ferry passengers during rush hours. More important, these phases don’t always last very long, presumably because drivers converge at the spot, and consequently passengers who aren’t in a tearing hurry can still make it to work paying the usual fare. In other words, users have a choice. Given how in most Indian cities, taxi/auto drivers rarely go by the meter, and more often than not demand a huge premium to the normal fare—if at all they agree to take you to your destination—surge pricing isn’t an unreasonable proposition; indeed, it is market economics at work and some variant of it is used in several industries.

It is not as though the passenger is unaware that she is going to pay more since the Uber app informs her about the higher rate. Moreover, it also has details of how long it will be till the passenger can hope to ride at the normal fare. That’s a fair deal. The criticism surrounding surge pricing, if any, is more valid in Western countries where passengers pay a fixed price, not a price fixed by the driver, as mostly happens across India. In fact, given no state transport department polices taxi/auto drivers and complaints by customers are rarely ever heeded, the Karnataka transport department doesn’t really have a leg to stand on. If all state governments promise to chasten taxi/auto drivers, and to discipline them, the need for surge pricing would not arise because there would be plenty of taxis/autos cruising along everywhere and the competition would force an Uber to reduce fares and do away with surge pricing. It is because the former are such a callous lot that aggregators like Uber and Ola are in business. By interfering in their working, the government is only hurting the interests of consumers.

 

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