India’s ministry of road transport has issued guidelines for ride hailing services such as Uber (Uber Technologies Inc.) and Ola (ANI Technologies Pvt. Ltd), identifying them as on-demand information technology-based transportation aggregators and not taxi companies, although it is up to the states to accept or reject this.
The guidelines, issued last week, come as a shot in the arm for Ola and Uber that have all along claimed that they connect passengers with drivers by leveraging technology, and are therefore not taxi companies.
Mint has reviewed the guidelines.
According to them, the aggregators must not own or lease any vehicle, employ any drivers or represent themselves as a taxi service, unless also registered as a taxi operator.
Taxi operators are to maintain a minimum fleet size, office space and parking space for all taxis, among other requirements.
The ministry’s guidelines should clear the air surrounding ride-hailing services after a driver hailed through the Uber app raped a woman passenger in December 2014.
Several states tried to ban ride-hailing services or have them register as taxi operators after this.
There has also been confusion and legal bickering over whether such ride-hailing services can be used by drivers of diesel cars in cities such as New Delhi where all local taxis have to use compressed natural gas (CNG).
Still, the states could choose not to accept the transport ministry’s guidance.
Karnataka says it will release its policy next week. “The guidelines have come from the central government but this is not binding on us. We will have to formulate our own guidelines based on state-specific interests. We are currently consulting all stakeholders and legal departments. The final draft will be out within the next one week,” said H.G. Kumar, additional commissioner for transport and secretary, state transport authority, in Bengaluru.
Experts said the government’s stance was akin to a corrective approach and it has to be careful in regulating upcoming businesses.
“The government should draw a fine balance on how to regulate these companies. The state government’s guidelines would be an additional layer of regulatory requirements,” said Sandeep Ladda, partner and national leader of the technology and e-commerce practice at PricewaterhouseCoopers India.
The Maharashtra government has issued a City Taxi Scheme 2015, encompassing taxi service providers as well as aggregators of taxis, which could deal a blow to Ola and Uber. The regulations state that licensees should maintain a fleet of a minimum 1,000 and a maximum of 4,000 taxis, a cap which may restrict the businesses from scaling up in Mumbai, a key market.
“This kind of limitation is not a welcome move,” said Ladda.
Ola has welcomed the government’s regulations.
“We welcome the advisory from the Ministry of Road Transport and we believe this is a major step towards positively impacting the ecosystem and its stakeholders that technology platforms like ours have created. We will continue to work with the government, under the aegis of this progressive directive, offering our complete support and commitment towards building mobility for a billion people,” Ola said in a statement.
While the regulations come as a relief to Uber and Ola, they may pose operational hurdles.
For instance, the regulations mandate that the drivers on the platforms must be permitted to log in or out of the network at will and under no circumstance be prevented from operating on multiple platforms. They also prevent the companies from imposing a minimum number of work hours on the drivers, but follow rules for maximum hours of safe driving.
To be sure, neither Ola nor Uber forces drivers to put in fixed hours or prevent them from being present on multiple platforms. However, a majority of the drivers are drawn towards these platforms for incentives, which are over and above the fare charged from the passengers. The companies have incentive structures based on the number of rides, which depend on the number of hours put in by the drivers as more rides require longer hours.
This article was first published on Livemint.com