Will cab aggregators implement Karnataka government's new fare structure? Stakeholders divided

This is not the first time the transport department has fixed fares for cabs. Cab aggregators rarely followed these rules, continuing to impose surge pricing, and the transport department was also unaware of the implementation of the revised fares.

While the Karnataka government, on February 3, announced uniform fares for cabs operating under aggregator rules by firms like Ola and Uber, as well as for city taxis (non-app-based city taxis), the main question remains over its implementation.

"Aggregators must adhere to the new fare structure, or we will take action. This has been a long-pending demand from drivers. I've received a positive response from both drivers and passengers as they welcome the new fare structure," Karnataka Transport Minister Ramalinga Reddy told Moneycontrol.

However, the timing of the fare revision for cabs is also significant, as the state government plans to launch a ride-hailing app similar to Ola and Uber.

Also, read: Karnataka govt to launch Ola-Uber-like app by February: Transport minister 

Asked about the status of the app, Reddy said, "It will be launched in a month or two. Our app will follow the government-fixed fare, but the commission amount charged from drivers will be less."

According to the new fare structure announced by the state government on February 3, taxi vehicles will be categorised into three classes based on the cost of the vehicle. The base fare is fixed at Rs 100 for up to 4 km for vehicles costing up to 10 lakh, with Rs 24 per additional km. For vehicles costing between 10 lakh and 15 lakh, the base fare for the first 4 km will be Rs 115, and the subsequent per km cost will be Rs 28. For vehicles above 15 lakh, the first 4 km will have a base fare of Rs 130, and each additional km will cost Rs 32. According to the order, cab aggregators are not allowed to collect surge pricing from passengers.

Also, read: Karnataka government revises cab fares, including Ola & Uber

L Hemanth Kumar, Additional Transport Commissioner and Secretary of the State Transport Authority, told Moneycontrol, "We will issue notices in a day or two to aggregators asking them to comply with the new fare structure. We will take action if they don't follow the rules."

Not the first time

However, this is not the first time the transport department has fixed fares for cabs. In 2018, for the first time, the government fixed fares for aggregators based on the price of vehicles categorised into four classes. The fare structure was classified into four categories as per the cost of vehicles, with A being the highest (more than Rs 16 lakh) and D being the lowest (up to Rs 5 lakh). This came after the earlier tariff, which did not specify a minimum fare but capped the maximum fare at Rs 14 per km for non-AC vehicles and Rs 19.5 per km for AC vehicles. In 2021, the government revised fares for these four categories and also barred fares based on journey time and dynamic pricing.

However, cab aggregators rarely followed these rules, continuing to impose surge pricing, and the transport department was also unaware of the implementation of the revised fares.

However, app-based aggregators were forced to implement a minimum autorickshaw fare fixed by the Karnataka High Court. Following the court's intervention, the minimum auto fare charged by aggregators in Bengaluru was reduced to Rs 35 from around Rs 100. According to its order in October 2022, app-based auto aggregators cannot charge 10 percent more than the government's base fare plus the applicable 5 percent Goods and Services Tax (GST). In November 2021, the state government set the minimum fare at Rs 30 for the first 2 km and Rs 15 per additional km for auto rickshaws, bringing the minimum fare for app-based auto rickshaws in Bengaluru to Rs 35. Auto aggregators were charging more than Rs 100 as the minimum fare until the court intervened in October 2022.

Also, read: Rapido launches ‘Auto Plus’ in Bengaluru, promising no cancellations; tariff above HC-mandated fare

Tough to implement 

However, a senior transport department official said, "There are practical difficulties in enforcing the new fare structure. i) Licences under the Karnataka On-Demand Transportation Technology Aggregators Rule 2016 for both ANI Technologies (operator of Ola) and Uber expired in 2021, and the matter is still pending in court. Another operator, Rapido, also did not take a licence to operate cabs. ii) The Karnataka High Court had asked us not to take any coercive action against the aggregators. iii) We will come to know the violation only if a passenger calculates it by dividing the fare by the total distance covered once the trip is completed. iv) We cannot take any action against drivers in cases of overcharging/surge pricing since the fare structure on the app is fixed by the respective aggregator."

"The aggregators followed the fare structure for autorickshaws because of the high court intervention. Unless the court intervenes, they are unlikely to implement," he adds.

K Radhakrishna Holla, President of the Karnataka State Travel Operators' Association (KSTOA), said, "We will welcome the uniform fare structure, but we are doubtful about the implementation part. Both predatory pricing and surge pricing are not good. But there is no mention in the order of how they monitor the fare structure implementation. There is no mention of what fine will be initiated or the nature of action if they violate rules."

Flaw in uniform fares ? 

The Federation of Karnataka State Private Transport Association President S Nataraj Sharma said, "There is a flaw in the fixed fare. This fare has been fixed based on the cost, not on their make. For instance, app-based aggregators categorise vehicles like sedans, SUVs, and hatchbacks. Also, SUVs of some companies will be in the range of Rs 12-14 lakh, and for others, they will be Rs 20-25 lakh. But it would be unfair to ask a driver to charge a lower fare since the vehicle cost is lower. The government should announce a fare structure for categories like sedans, SUVs, and hatchbacks, which is more practical."

When contacted, Ola and Uber were unavailable for comment. However, an industry source said, "We were not part of the stakeholders meeting. Earlier, each vehicle category had a fare range (minimum and maximum fare). There is also no mention of commission charges to the drivers/aggregators and only fare and distance are mentioned, and in a city like Bengaluru, peak hour time is also important when the demand for a cab is high. The revised fare will only increase the fares for passengers. This is like the autorickshaw fare structure, so they often demand more."

Airport Taxi Owners' Association President Hamid Akbar Ali said there is still ambiguity . "While the notification states it applies to all cabs, there is no clarity on whether it applies to tour cab operators, employee transport, etc. We have been demanding one airport, one fare, and finally a notification, and now it lies on implementation."

Some have urged that the fare revision be rolled back. Citizens Movement, East Bengaluru, wrote on X (formerly Twitter), "Government is bending its knees before strong taxi & auto unions! Nobody takes old-style cabs these days due to their monumental charges! Now the government wants Ola/Uber/apps-based aggregators to become like old ones! Not fair fare structure! Please roll back!"

Government is bending the knees in front of strong Taxi & Auto unions! Nobody takes old style cabs these days due to their monumental charges! Now government want Ola/Uber/ Apps based aggregators to become like old ones! Not fair fare structure! Please rollback! @siddaramaiah… https://t.co/uSZWfZwiih

— Citizens Movement, East Bengaluru (@east_bengaluru) February 4, 2024

Urban mobility expert Pawan Mulukutla said the government has no business fixing fares. "Cabs are a premium segment, unlike buses or autorickshaws. Fixing fares will kill innovation and also disrupt the demand and supply mechanism. If fares are fixed, there is no incentive for drivers, irrespective of the time, which will reduce the availability of cabs during peak hours when the demand is high. The prices should be decided by the market based on demand."

Also, read: Karnataka’s plan to fix prices for Uber-Ola cabs is going to boomerang badly