Ride-hail firms like Ola and Uber can only charge a fee of up to 20% on fares in India, New Delhi said in Policies on Friday, a new setback for SoftBank-backed firms that are already struggling improve their finances in India key overseas market.
The guidelines, which for the first time bring modern app-based hail shipping companies into a regulatory framework in the country, also limit the so-called rise price, the Uber tariff and Ola charge during hours when their services see peak demands.
According to the guidelines, Ola and Uber – and every other app-powered hail-fighting company – can charge a maximum of 1.5 times the base price. However, you can choose to offer their services at 50% of the base price. The rules also state that drivers cannot work more than 12 hours a day and that companies must provide them with insurance coverage.
Uber and Ola have not yet publicly disclosed exactly how much they charge their drivers for each trip. Industry estimates suggest that a driver partner from one of these companies makes up to 74% of the fare after paying taxes. The new guidelines state that drivers should keep at least 80% of the tariffs.
The fare cap and implied insurance costs will increase operating costs in India for Uber and Ola, both of which have cut jobs in recent months due to the cost-cutting pandemic. The South Asian nation, which has attracted many large international corporations in recent years in search of their next growth market, has now entered an unprecedented recession.
But not all of the guidelines are going to hurt Uber and Ola, both of whom had no comment on Friday. The rules allow companies to offer pooling (shared car) services for private cars, although there is a daily limit of four inner-city trips with such cars and two weekly inner-city trips.
Ujjwal Chaudhry, associate partner at Bangalore-based research firm Redseer, said the government's guidelines would have mixed implications.
“While this is positive in terms of formalizing the sector and increasing consumer confidence in aggregators through improved safety regulations. Overall, however, the impact of these guidelines on the growth of the ecosystem is negative as the cap on increase and the platform fee will ultimately result in a lower result for 5 Lac (500,000) drivers (currently on these platforms), and also higher prices and longer wait times will lead to the 6-8 million (60 to 80 million) consumers who use it for their mobility and commuting needs, ”he said in a statement.
The rules also take into account a number of other factors related to driving. For example, the cancellation fee imposed on a driver or driver cannot under any circumstances be more than 10% of the total price, and the fee cannot exceed 100 Indian rupees or 1.35 USD. Even female passengers looking for pool service have the option of sharing the cab only with female passengers, the rules say. Cabin power packs are also required to set up a control room with 24/7 operation.
Ola and Uber dominate the app-based ride-hail market in India. Both companies claim to be market leaders, although SoftBank, a joint investor, recently said that Ola was slightly ahead of Uber in India.