Karnataka ban impact: Uber may restrict auto services in parts of Bengaluru

Uber says there is an increase in cancellations after reducing the commissions.

Ride-hailing major Uber India may limit the auto services in some parts of Bengaluru as running the business may turn unviable due to the Karnataka High Court’s temporary orders to cap the commission charged by the aggregator at 10 percent, Uber spokesperson said in a blog post on November 1.

“If our costs can not be covered through commissions, we will have to find ways to offload costs that could impact the experience of drivers and riders…We may have to make the difficult decision to limit Uber Auto to select parts of Bengaluru where the service is viable,” said Nitish Bhushan, Head of Central Operations, Uber India & South Asia in the blog post.

This will hurt drivers and inconvenience riders who depend on aggregators for their commuting needs, Bhushan added.

The commission includes a convenience fee, which is charged to the passengers for doorstep pick-up. Commission also includes an amount deducted from drivers for the app-based ease of finding passengers.

“Every month, over 10 lakh residents of Bengaluru use Uber Auto to get around their city. They are served by over 50,000 auto drivers who supplement their earnings via Uber. However, drivers need to be compensated for the additional distance they travel and time they spend providing these doorstep pickups,” Bhushan said.

Uber also said that there is an increase in cancellations after reducing the commissions.

“Since removing the doorstep compensation, cancellations have increased by over 50 percent in the city, as availability reduces and drivers turn down trips that are not economically viable for them,” Bhushan said.

Uber must invest to build and operate the platform, he added.

“To be absolutely clear: Our commission is not equal to our profit. We have tech and engineering expenses, marketing spending to onboard more drivers and riders, and many other costs. Facilitating a market is not free. Commissions are used to cover our costs and make the business model viable,” Bhushan said.

This comes after the Karnataka high court on October 14 ordered the government not to take any coercive action, and allowed the companies to charge 10 percent of the base fare as a convenience fee along with 5 percent of GST as a temporary rule before the authorities come up with a plan.

The Karnataka High Court had also given 15 days time to the state government, regulators, and cab aggregators to work out a fair pricing mechanism. The next hearing was adjourned to November 7.

The Karnataka Transport Department and representatives of ride-hailing firms Ola, Uber, and Rapido met last week to come up with a consensus on fixing the commission. However, the representatives and authorities failed to reach a common ground on fixing the convenience fee levied on operating autorickshaws.

During the meeting held on Saturday, the companies argued to fix the convenience fee at 25 percent of the base fare, while the Karnataka Transport Department stressed continuing the court-fixed temporary rate of 10 percent. Earlier, the companies were charging a flat rate of Rs 40 per ride as a convenience fee.

Amidst the issues between the ride-hailing firms and the transport department, Bengaluru Auto Rickshaw Driver's Union (ARDU) has come up with its own transport app and launched a beta version with the objective to charge fair prices to take on rivals like Ola, Uber, and Rapido.

"Auto services on platforms like Uber have a different value proposition than regular street-hailed autos. Through platforms, customers have the advantage of doorstep pickups, and no longer have to walk to auto-rickshaw stands or hail an auto off the street," Bhushan said in the blog.