How much regulation is desirable in the transportation space

Hence, there is a fear that if they will regulate it will impact the services in near future but if they do not regulate at all, then the industry may suffer in the long term.

The Maharashtra State has taken a historic step by making kaali-peeli taxis, incumbents like Meru and aggregators like Ola & Uber part of the same regulation.

This inclusion has brought two major benefits to the consumers and drivers, firstly technology is available to all players i.e now even a driver of kaali-peeli can use Meru or aggregator’s technology and secondly the consumer will be able to book a taxi of any kind on a single app.

This move promises better availability of public transport, greater transparency and quality of service for kaali-peeli’s.

The rules have also taken a very bold step to make the fares range bound. Till now, all fares were regulated by per km irrespective of the location and time of the day, however with the introduction of minimum and maximum fares will help the aggregators/operators to use algorithms to optimize the fares for consumers and drivers simultaneously. 

Things to consider to ensure fair pricing

Some of the economist and businesses that support free market pricing argue that there should be no cap on maximum fares, but I strongly believe that atleast for next 5 years the taxi industry should have cap on maximum fares.

There are enough and more examples where monopolistic market situations have led to price increase and ultimate loss to consumers. In December 2004, TRAI came up with circular that “wherever differential tariffs are anti-competitive or predatory aimed to lessening competition it shall require regulatory attention”.

Similarly, in China, after the merger of two of the largest taxi players in China, the consumer fares have significantly increased and subsidies have been withdrawn for drivers.

Given this, the following arguments should be considered to ensure fair pricing:1) India is a supply constraint market and in such economies it is important to have Maximum Retail Price (MRP) so that consumer interest is protected. The practice of MRP has been consistently applied to all products where supply has been a constraint in India.2) Secondly, the arguments by the economist that let market forces decide pricing is flawed.3) Currently, the pricing of taxi services is decided by the taxi operators and not by the drivers. Therefore, the basic principle of large buyers and large sellers having significant pricing information at time of purchase are not followed.4) This is like saying all transaction prices will be decided by BSE & NSE. The day drivers decide the fares and the fares are known to consumer and he can choose the taxi he wants to take, free pricing should be implemented in India.5) Lastly, the drivers, the consumers and the regulators know that huge subsidy and discount is given by the operators to create a monopolistic market situation, if such monopolistic practices continue for the next 2 to 3 years, the last standing player will charge very high fares to recover all the investment made during initial years. This will prove detrimental for the industry and the consumer.

Why minimum price should be controlled

The question also arises why should minimum price be controlled? It is important to control minimum price offered by players, thereby preventing certain players to offer discounts and subsidies at unreasonable price points.

The DIPP has made clear rule under Press Note No. 3 of 2016 dated 29th March 2016 that no e-commerce player can sell below cost. This regulation was introduced to ensure that in long term consumer interest are protected by ensuring healthy competition in the industry.The government has responsibility to ensure free and fair competition exists so that industry flourishes in the long term. I believe, measures such as these will foster a level playing field with competitive pricing which will positively benefit both consumers and drives alike and propel the growth of a dynamic and competitive radio taxi industry.

Lastly, the debate about type of fuel for taxis. I understand that in short term there may be some cost associated with conversion of diesel to CNG, however, again in the long term, it is in best interest of the society.

Diesel fumes are 20 times more carcinogenic than CNG fumes. We cannot be solving the transportation problem by creating more health problems. As responsible corporate citizens, we should shoulder the responsibility of providing safe and healthy environment to everyone in the society.

The Maharashtra rules allow diesel cars to be converted into CNG over one year. This in my view disrespects the regulations, judiciary system and constitution of India.

No organisation which has wilfully carried out violation of the law with the intent to make commercial benefit should be allowed to continue any offence. The organizations should be penalized as per the law of the land so that respect for Indian democracy and judiciary system is maintained.

Regulation flaws

But everything in the new rules are not perfect, I believe there are few flaws in the rules which I urge the Government to consider. The two specific ones that come to my mind are as follows:1) The state transport authority should not decide how many small cars and how many sedan cars are required in the city. This is an ever changing situation and the operators should decide this based on demand and supply.

The demand for taxi is anticipated to grow at 35% CAGR in the next 5 to 10 years. Given this vast growth potential, we believe there should be greater focus on ensuring enough good quality vehicles are available on the roads rather than deciding how many which type of vehicles.2) Secondly, charging high license fee or permit fee is not appropriate. Across the globe personal vehicles are charged more tax as compared to public service vehicles.If India has to deliver double digit GDP growth, smooth transportation and commute solution is a must, therefore government should streamline governance and not charge high taxes when selling licenses. The taxi permits should be made available on tap.

Ride sharing concept missing in regulations

One point that is not even included in the regulation is ride sharing concept. India has come a long way in adopting new technology. In it’s own way ride sharing has been prevalent in India for years across metros with share taxis / autos, local train stations as well as in small towns finding resonance amongst Indian consumers.

With the advent of high quality technology, sharing can now be done with ease, the government should encourage ride sharing and in fact, some tax benefit can also be considered provided for ride sharing so that load on infrastructure and pollution goes down further.

The young aspiring India needs convenient, cost effective and safe travel solution both in the short term and medium term, hence there is an urgent need for regulations that creates healthy sustainable competition embraces technology and focuses on quality of service.

(The author is Group CEO of Meru Cabs and Secretary of Association of Radio Taxis in India. Views are personal.)