Karnataka govt proposes 5% commission for app-based auto aggregators Ola, Uber and Rapido

Both Uber and Ola are currently facing the ire of customers in India for random surge pricing. (Image source: Reuters/Representative)

Karnataka's transport secretary on November 25 proposed a commission of 5 percent exclusive of GST to be levied by the app-based auto aggregators Ola, Uber, and Rapido, which is lesser than the Karnataka High Court’s temporary orders to keep the commission at 10 percent.

“The secretary’s office has submitted to the Karnataka High Court that around 5 percent is the fair commission that can be allowed. The final decision, however, will be taken by the High Court,” said sources from the transport department.

This comes after months of ongoing debate over commission charges and licenses of app-based auto aggregators Ola, Uber and Rapido.  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.

The court will hear the parties on November 28.

In a media statement, Uber has said that if the commission is not sustainable the company will have to cut costs.

"We are yet to see the government proposal. But as we have mentioned earlier, any commission constraints should be financially sustainable to run operations. If our costs cannot be covered through commissions, we will have to find ways to offload costs that could impact the experience of drivers and riders," an Uber spokesperson said.

Earlier, the government had agreed to the Karnataka High Court’s temporary orders to cap the commission charged by the aggregator at 10 percent.

However, several meetings were held with various stakeholders including drivers, citizens and industry representatives. Several stakeholders said that the commission should be completely removed or the state should launch its own app.

During the last meeting held on November 15th, the Karnataka Transport Commissioner SN Siddaramappa said that developing a new ride-hailing app by the state will be time-consuming and difficult.

“While convenience fee at a fair pricing can be allowed, we are very much against the surge pricing and increased cancellations by drivers of Ola, Uber and Rapido,” said a resident of Yeshwantpur during the meeting.

Industry sources said that if the commission is below 25 percent the business is not feasible.

Uber in a blog post wrote that it may limit the auto services in some parts of Bengaluru. Running the business may turn unviable.