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Jan 11, 2017 08:15 PM IST IST | Source: PTI

Foreign capital should be regulated for cab aggregators: MDI

In its recommendations to the government, MDI, however, supported the surge pricing strategy saying it provides a competitive advantage to application-based cab aggregators (ABCAs) and makes this market attractive for new entrants.

Batting for regulating foreign capital inflow in cab aggregators in the country, Management Development Institute (MDI) today said such a move would stop companies from competing on price front alone.

In its recommendations to the government, MDI, however, supported the surge pricing strategy saying it provides a competitive advantage to application-based cab aggregators (ABCAs) and makes this market attractive for new entrants.

"In the benefit of ABCAs, incumbents, drivers, consumers and taxi industry as a whole, it would be prudent if the capital flowing from abroad in this sector is regulated so as to stop companies from competing on price alone," MDI said.

Stating that it is not in favour of removal of dynamic pricing completely, MDI said there must also be measures to check over-incentivising of drivers.

"The companies need to compete on parameters other than prices such as innovation, localisation, service quality, reliability etc. One option is that ABCAs should not be allowed to price their services below the cost," it said.

The taxi space in India has been witnessing a phenomenal growth in the past 6-7 years. Over USD 400 million (Rs 2,400 crore) of venture capital has been pumped in into these companies in the past 4 years.

The Indian radio taxi market alone is pegged anywhere between USD 6-9 billion and is forecasted to grow at 17-20 per cent annually.

On surge pricing, the report said restricting surge pricing completely may stifle the innovative strategies adopted by these emerging business models.

"We recommend that surge pricing may be permitted, subject to certain restrictions, such as a limit on the multiplier (say a maximum of 3), prohibiting surge pricing during emergencies, etc," it added.

The recommendations also called for the government to take into account the inclusion and continuation of existing mobility solutions like black and yellow taxis and autorickshaws.

"Any regulations imposed should create a level playing field for all players and prevent practices such as subsidisation of passenger fares that could create entry barriers for them to enter the application based transport services aggregation platform," it said.

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