Moneycontrol
Jan 13, 2017 11:17 AM IST | Source: Moneycontrol.com

'Foreign funding should be scrutinised in taxi hailing apps'

“Government regulations should be broad in order to ensure companies don't create alternate channels to subsidise and incentivise in excess of the revenues collected from customers,” the report recommended.


Moneycontrol Bureau

The government should revise and revisit regulations for businesses in the cab aggregation space and foreign funding should be scrutinised on a case-to-case basis to prevent uneconomic competition as the industry holds tremendous potential in the near future, a joint study conducted by MDI, Gurgaon and Resource Development International (RDI) has suggested.


Over 1200 drivers and 300 customers across Delhi, Mumbai, Bangalore, Hyderabad and Kolkata were surveyed under the study.


The study was concerned regarding shared economy, dynamic pricing, incentives and working condition of drivers, passenger safety, uneconomic competition and impact of ABCAs on other modes of transport.


Nearly, 79 percent of app based cab drivers reported an increase in income from before as 55 percent of commuters across India prefer hailing a taxi from an app-based aggregator.


App based cab drivers make the maximum number of trips per day and 50 percent or more of the income earned by app based cab driver is derived from the incentives paid by the aggregators.


The study made specific observations regarding taxation. “Our policy is based on the old school thought of taxing products,” said Rajeev Gupta, MD, RDI (India).


“Like, when products were imported below the market rate, an anti-dumping duty was imposed to protect Indian companies. Even in manufacturing, when a foreign technology is deployed in India an import duty is imposed on the technology. However, this definition is not extended to the technology developed abroad and ‘downloaded’ at home. Suppose Amazon or Uber develop technology abroad and deploy it here, there's no physical product that can be valued for imposing an import duty.” he added.


The report also studied the implications of investment of foreign capital in the cab aggregation business. Foreign investments are used to offer discounts for customers and incentives for drivers. This type of business model cannot be sustained forever. Restricting foreign investment completely may not be wise but regulators must scrutinise the trade-offs.

“Government regulations should be broad in order to ensure companies don't create alternate channels to subsidise and incentivise in excess of the revenues collected from customers,” the report recommended.


According to the report, parameters of competition should go beyond low-pricing. The government should fix minimum fare and aggregators should not be allowed to set their fare below the market cost as this will help in removing entry barriers and encourage new entrepreneurs in this space.


The research discovered that drivers work for more than 12 hours non-stop for incentives. Sleep deprived and fatigued drivers jeopardise safety of passenger and other people on the road. They also tend to behave badly and harass customers. It raises serious questions on the viability of the model and sustainable livelihoods of drivers in the time to come.


Extolling the virtues of ‘shared economy’, the report appreciated the idea of shared cab rides by the aggregators but on the other hand raised questions on passenger safety, they suggested that app-based aggregators must have a 24x7 emergency hotline or call centre. At present, only Ola has a customer call centre to resolve issues immediately and answer SOS calls.


The research concluded that among all sorts of taxi service providers, cab aggregators such as Ola are the most favoured platforms for both customers and drivers.


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