The Delhi government has said that it will introduce a permanent ban on surge pricing by taxi aggregator apps like Ola and Uber. On Monday, it had temporarily suspended surge pricing for the duration of the fortnight-long odd-even scheme in the Indian capital.
Delhi chief minister Arvind Kejriwal described surge pricing as “daylight robbery” on Twitter. “Some taxis saying they will not provide cab if they are not allowed to loot,” Kejriwal wrote. “This is open blackmailing and government will not let that happen.” The government is likely to introduce a policy to regulate the fares of app-based taxi companies.
“We are not against taxi aggregators. We fully support them. They provide important service to the people, but they will have to follow law,” Kejriwal tweeted. “Overcharging, diesel cars, drivers without licenses and badges and blackmailing by taxi aggregators won’t be allowed.”
Surge pricing is daylight robbery. No responsible govt can allow that(1/2)— Arvind Kejriwal (@ArvindKejriwal) April 20, 2016
Some taxis saying they will not provide cab if they are not allowed to loot. This is open blackmailing n govt will not let that happen(2/2)— Arvind Kejriwal (@ArvindKejriwal) April 20, 2016
Yes. We will do it https://t.co/0BHJISqdse— Arvind Kejriwal (@ArvindKejriwal) April 20, 2016
Delhi’s odd-even scheme, which ends on Apr. 30, hopes to tackle air pollution and traffic jams by placing restrictions on private vehicles on alternate days, with odd-numbered vehicles being allowed on odd dates and vice-versa. After numerous complaints over fare hikes that were up to five times the normal rate, the Delhi government said that it would take strict action against taxi apps and impound vehicles for over-charging passengers.
The announcement resulted in Uber and Ola temporarily suspending surge pricing on Monday, but around 50 cabs run by taxi apps have been impounded for over-charging customers. While several Delhi residents welcomed the move as a step towards greater transparency, others complained that it led to a shortage of cabs.
Uber said that the decision was due to “the threat of the Delhi government to cancel permits and impound vehicles. The company also sent messages to its customers that they may face a shortage and long waiting period for taxis primarily in the absence of surge pricing.
#UberDATA: In the last 3 days & also during the first ODD-EVEN in January, less than 8% trips happened on surge in Delhi. / @Uber_Delhi— Uber India (@Uber_India) April 18, 2016
#UberDATA: Average surge multiplier was under 2x. Even with surge, Uber was more affordable than Radio Taxi & Govt. prescribed rates.— Uber India (@Uber_India) April 18, 2016
Uber also defended surge pricing, arguing that it ensures that more drivers are available on the road during times of peak demand. It maintains almost all the extra fare goes to the drivers, and that reports of the company over-charging customers in Delhi were inaccurate.
Our goal: Get you a ride within minutes, at a push of a button — even on the busiest days. Surge pricing makes this possible, almost always.— Uber India (@Uber_India) April 18, 2016
Uber’s stance is along the lines of its global policy towards the dynamic pricing model. This has brought negative publicity for the company during emergency situations such as the Sydney hostage crisis and storms in the US. It also been called one of Uber's most hated features.
In contrast, Uber’s main rival Ola, which runs autos and shuttles besides taxis, has framed its response slightly differently. It has been promoting “shared mobility”, in the form of its carpooling service Ola Share and its shuttle, as a solution to the odd-even traffic restrictions. The company is even giving free rides to users on its 500 shuttles in Delhi on the next two Fridays of this month to support the scheme. The service, which operates over 120 routes, claims to transport over 20,000 customers a day. Ola also says that it has added 1,000-odd vehicles to its fleet in Delhi and is running on-ground awareness campaigns to encourage people to use its ride-sharing options.
We've temporarily pulled out Peak Pricing in Delhi, in support of Govt's #OddEven initiative. Travel at 1x fares & make #OddEven a success— Ola (@Olacabs) April 18, 2016
Surge pricing has been compared to the dynamic pricing used by airlines and hotels to match supply and demand. Regular Uber and Ola passengers argue that the solution lies in putting a cap on surge pricing, rather than doing away with it altogether.
This is being tried out in the state of Karnataka, where the government fixed a price ceiling for taxi fares earlier this month, effectively restricting surge pricing to an upper limit. The decision has already been contested by Uber, but the response to these decisions in Delhi and Karnataka may well decide the fate of surge pricing in other Indian cities as well.