Hailing a wrong cab with the new Motor Vehicles Act

The cab industry in India is crisis at the moment. Drivers from cab-aggregators like Ola & Uber are going on strike across various cities demanding better deals, various state governments or regulating bodies are pulling up the cab-aggregators for their crafty pricing, numerous cases being fought in various courts over a range of disputes. Things have come to such a pass, that drivers are now even committing suicide in despair.

The irony is that the cab industry in India was just about to blossom into a bigger play. For years, commuters in Indian cities had suffered at the hands of unionized kaali-peelis or autowallahs, and the new age cab companies arrived on the scene almost like a knight in white armour. Not only could you hail a cab at a tap of an app, but you even paid much lower for the commute. With the behemoths in the industry competing for spoils, the Indian customer was having a field day with all the freebies and discounts thrown in. It was as if, after years and years of torment, deliverance was close at hand.

But then, the script changed quite swiftly. Thanks to all the predatory (pricing) play, competition was almost decimated and the cab-aggregators changed the tempo of the game. From customer-centric policies to surge-pricing, from heavy incentives to drivers to none, in a manner of months, the industry that all set to peak was caught in a grind. It is like a swanky airplane promising much and crashing on the runaway even before the take off.  That’s how the scenario is at the moment.

In all this turmoil, you’d expect the government of the day to act in a more nuanced and impartial manner. Right? And yet, that is not what is happening at the moment. Take the case of the latest amendments to the Motor Vehicles Act that have been tabled in the Parliament during this session or the guidelines for cab aggregators released by Ministry of Roads, Transport and Highways (MoRTH). A detailed read of the guidelines gives an impression that the Union Government, or rather the ministry for road transport and highways, seems to be playing favourites in the taxi industry.

To give a small background. There is much struggle for market dominance in the annual $13 Billion (yes, ₹91000 crore!) industry, as two well-funded giants  Uber & Ola have rocked the industry with a slew of questionable business practices, right from ignoring local laws to predatory pricing. These tactics has created much turmoil for the existing players like the kaali-peelis and radio cab operators like Meru, TabCab, Mega, Easy, Sky cabs etc. Due to much resistance and protest, numerous state governments (Delhi, Maharashtra & Karnataka) passed strictures against these cab aggregators. When the matter reached the High Court in Delhi, a specific requisition was made to the transport ministry to draft a set of rules and guidelines which could be followed.

The committee presented the guidelines in Dec’16. And though, it seems pretty progressive and innovative in its outlook, a little deep-dive throws up some uncomfortable aspects, like for instance, it seems too slanted in favour of the cab aggregators like Uber. There are numerous instances in which, there seems to be a deliberate attempt to legitimize the app-based companies and stall any questions raised against them. While the committee should have ideally drafted a set of guidelines that would have worked for all the players; there seems to be only one victor in these guidelines. Here’s how:

Solving the urban transport maze

The report at the very onset sets a lofty objective of trying to solve the urban transport puzzle. Through a peppering of statistics largely drawn from overseas, quoting research by University of California, Berkeley, etc, an argument is made as to how critical the cab aggregators are for the ecosystem. For instance, the report quotes a modeling done by The International Transport Forum, where “was found that when cars on road were converted to shared assets–congestion reduced by 37% and parking space freed up by 90%.” This is used as a pointer to “promote shared transportation” and “ease many bottlenecks that have prevented the growth of the passenger taxi operations”.

Yet, a simple review of the situation will state that we cannot have private solutions to public problems. Namely, managing transport and solving the issues of congestion should is a government’s job, how can it be outsourced to private players. Also, a robust public transport system comprising of metros, rails, buses, etc. is an ideal solution for solving the transport crisis. How can a torrential flood of private cars on the already clogged road really be termed as a solution? There needs to be a holistic approach, not a ad hoc one.

Protecting the consumer

A government’s first (and often the only) priority should be towards its citizen. All the steps undertaken by any ministry should be weighed on the scale of public welfare. Sadly, the draft guidelines seem to falter on this important scale as well. While there is talk of capping the fares, it is only being done for a segment of cars (less than 4 metres). Also, the fares are capped at 3X and 4X of existing minimum fares. That means, an Ola & Uber can still charge up to Rs. 40-60 per km (the Rs. 6 per km is a sham, as there is a base price and per minute charge as well) depending upon the time of the day. In case, cars bigger than 4 meters like the popular Etios, the operators are free to charge any price. What’s more, the other category, city taxi (which will include all kaali peelis) would also be able to surge the prices once they join aggregator platform. Such economic incentive would ensure that all transport services will join one or two platforms and 3x -4x surge will be common for every cab service.

In numerous judgements, the courts had again and again spoken about the need to curb surge pricing and how it’s unfair to the traveler. Yet, the government seems to be pretty oblivious to it and almost letting the cab aggregators do as they wish in terms of pricing. Also, there is not much emphasis laid on providing customer service (just a mention of grievance redressal mechanism) or consumer safety. The emphasis, as stated in the report, is to “avoid unreasonable restrictions that will make taxi operations economically unviable” rather than providing safe and economical service to the population.

Pollution hypocrisy

There are many references made to pollution in the report. In fact, there is a whole paragraph that details the situation. “Indian cities suffer from severe congestion and pollution in the world. Congestion related loss amounts to Rs. 60000 crore per annum (~ $ 8.8 billion). The social cost of pollution is also very high. Over half of the world’s 20 most polluted cities are in India. A major reason for this has been the uncontrolled growth of cars in our cities.”

Yet, guess what is the solution the report proposes? Adding more and more of toxic-gas emitting cars into the cities. While over the years, and much thanks to the courts, the urban transport system had to shift to CNG, the report allows cab aggregators to continue to operate their polluting diesel cars till the end of the life-span. Considering that no such privilege was given to the kaali-peelis and others, when they were forced to go green with CNG, why is this selective exception made for Uber & Ola? Especially, when the cities are in a terrible mess due to air pollution. If this isn’t hypocrisy, than what else is.

Federalism at stake

Many would say these are mere guidelines and states are free to accept or not accept them, as has been the case with federal structure and transportation being an item on the concurrent list. In such a case, why to make a fuss about these guidelines, right?


The current guidelines though are much more than just guidelines. They are a realignment of power structure in India, in which the centre seems to be usurping more power for self. Even as you read this, there is an amendment to the Motor Vehicle Act that has been approved by central cabinet and tabled in parliament. The act basically, by tweaking the text of the existing act will ensure that the controls of the aggregators and the transport sector shift from the state to the centre.  The beauty of the whole deal is that this change is being introduced with great subtlety.

In the clause 34, Section 2, subsection  2; “Provided that while issuing the licence to an aggregator the State Government shall follow such guidelines as may be issued by the Central Government:”

In simple terms, the word ‘shall’ instead of ‘may’ makes it mandatory for all state governments to follow the guidelines issued by the central government , a single change of word that changes the whole contour of the game. With this dual swoop, the centre assumes the power for the cab industry, the local governments or bodies will no longer have any say on the same and the aggregators get the most favourable regulations across the country. This very point has been highlighted in the report by The Parliamentary Standing Committee (PSC) on Transportation under the chairmanship of Mukul Roy. Here’s how it puts up the objection:

  1. Clause 34 of the Bill proposes certain amendments in Section 93 of the Principal Act which inter alia prescribes the issuance of licenses to aggregators. The Committee notes that it has been prescribed that while issuing the license to aggregators, the State Government shall follow such guidelines as may be issued by the Central Government. The proviso makes it amply clear that the State Governments should follow the guidelines issued by the Central Government for issuance of licenses to aggregators. The Committee feels that the control of transport vehicles are the exclusive domain of the State Governments. Through this amendment, the balance of power between the Centre and the State has been tilted and the Central Government will get a preponderance of power to control the aggregators throughout India. The Committee believes that there is no need to take away the rights of the State Governments with regard to control of transport vehicles. The Committee, therefore, recommends that every State Government should have its own powers and guidelines to control the operations of aggregators within the State. The Committee further recommends that in Clause 34, Section 93, sub-section (iii) (b) proviso, in place of the “State Government shall follow” with words “State Government may follow” be substituted. The Committee recommends that while encouraging aggregators certain effective protective mechanism should be evolved for small operators and local taxi drivers to ensure that their livelihood is not jeopardized.

In the end, the amendments to the Motor Vehicle Act have been put up in the Lok Sabha, and in all likelihood will pass through during this session.  In the bargain, the whole eco-system might be jeopardized.  With such turmoil in the industry, one would expect the government to ease the scenario and not complicate it further by bringing in questionable regulations. The fact that at numerous times the various courts in India have raised pertinent queries and passed strictures is a fact that all is not really well in the manner in which the industry is regulated. What we need today is a comprehensive system that favors none, and is equally just to commuters, companies and the drivers. Sadly, the manner in which the current Motor Vehicles Act is designed, leaves a lot of gray areas. It might seem like progressive right now, but could lead to a whole lot of crisis in the future.

Let’s hope good sense will prevail and the Indian cab industry can grow in an inclusive and rewarding way.


Author: Shashwat DC

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