You are using an older browser version. Please use a supported version for the best MSN experience.

Karnataka transport panel recommends minimum fare for cabs

LiveMint logoLiveMint 21-03-2017 Sharan Poovanna

Bengaluru: Ride hailing services Ola and Uber may be forced to nearly double the minimum fare in Bengaluru, one of their three biggest markets in India, if a committee set up by the state transport department has its way.

The committee, formed earlier this month to look into fares charged by ride-hailing services, has recommended that the state government should fix a minimum fare of Rs10 per km for non-air conditioned cabs and Rs12 for air-conditioned cabs, said M.K. Aiyappa, commissioner for transport and road safety.

All cabs affiliated to Ola and Uber are air-conditioned, which implies that these businesses will have to charge at least Rs12 per km if the government chooses to stick to the committee’s recommendations.

The recommendation is hence almost double of what the companies currently charge.

ALSO RREAD: Uber, Ola may be forced to raise minimum fares in Karnataka, Maharashtra

To be sure, this might not immediately translate into a fare hike. Both Ola and Uber currently charge consumers Rs35-50 as base price in Bengaluru. According to industry executives, the absolute increase in fare might become minimal if the companies lower the base prices to accommodate the higher per km charges.

Karnataka and Maharashtra had set up committees to look into fares charged by ride-hailing services. The committees will not only look into the upper ceiling—the most these companies can charge—but also mandate minimum fare per kilometre, Mint reported on 9 March.

The move comes in the wake of complaints and protests by drivers affiliated to the ride hailing platforms over a drop in incentives and by traditional taxi operators, who have accused the venture capital-backed companies of undercutting fares, which has adversely impacted their businesses.

In Bengaluru, Ola’s cheapest offering, Ola Micro, is priced at Rs6 per km while UberGO costs Rs7 per km. Such low fares have made Ola and Uber even cheaper than autorickshaws, as well as the likes of Meru Cabs. For instance, autorickshaws charge Rs13 per km in Bengaluru, while Meru Cabs’ cheapest offering, hatchbacks, cost Rs9 per km.

ALSO RREAD: Ola, Uber may find a new rival in HDK Cabs in Karnataka

To be sure, Karnataka has an upper ceiling for fares. For instance, the state does not allow companies to charge more than Rs19.50 per km.

Fixing a minimum fare may, however, make Ola and Uber less lucrative for consumers.

Backed by venture capital firms, both Ola and Uber have built massive businesses in India by attracting customers with extremely low prices. Both companies together completed about 500 million rides in 2016, as against about 130 million rides the year before, according to RedSeer Management Consulting Pvt. Ltd.

Uber is the most valueable start-up globally at $68 billion and has raised more than $10 billion in equity and debt funding. Ola, one of the so-called home grown unicorns at $5 billion, has so far mopped up about $1.3 billion.

Bengaluru and Mumbai are among the three biggest markets for ride-hailing services, along with Delhi. According to RedSeer, Delhi, Bengaluru and Mumbai account for up to 60% of Ola and Uber business in the country.

More From LiveMint

image beaconimage beaconimage beacon