Half a fix at Ola/Uber PDF Print E-mail
Wednesday, 21 December 2016 05:07
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Allowing surge-pricing good, but don’t stop low fares


The government, according to a news report in The Times of India, may finally be getting its act together when it comes to dealing with app-based taxi-hailing services like Ola and Uber. In the past, both the central and state governments seemed opposed to the idea of surge pricing on grounds this was taking advantage of hapless consumers. This was completely off the mark since consumers knew of the surge before they hailed the cab and, in any case, is most cities, autorickshaw and taxis have their own unofficial surge and often charge consumers rates quite unrelated to the distance travelled; also, apart from airlines, even the railways is now looking at a version of surge or dynamic pricing. After initially wanting to put a low cap on the Ola/Uber surge, The Times of Indiareports, the centre is likely to come up with regulations that cap the surge at three times during regular hours and at four times during the night – this is reasonable as surges have rarely gone up beyond this. What the politicians want, though, is a floor on the fares, to prevent what they feel is predatory pricing by app-based taxi-hailing firms which have access to cheap foreign money. There seems to be a bit of a divide in the industry with Ola raising the issue of predatory pricing, but it has to be recognized that surge and low-base fares are intertwined – the surge is primarily used to compensate taxis for the very low fares they offer to attract customers during regular non-busy hours.


Apart from the fact that putting a floor will deny customers the benefit of lower fares, the government needs to keep in mind it cannot have different policies for different sectors. In the case of telecom, it has done nothing to prevent RJio from offering subsidized services on grounds this is not violating the competition act – under the traditional definition, a company has to have a significant market share to be accused of predatory pricing, and RJio is a newcomer. By that definition, even the app-based firms are new entrants. If, however, the government feels that prevention of market-disruption is critical – traditional anti-dumping duties, for instance, do not take market-shares into account – and therefore a floor on taxi fares is desirable, then this rule has to apply to telecom as well.



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