Uber/Ola vs Kaali Peelis: Why this should matter to us

A lot of froth has been generated by way of strikes planned by Mumbai taximen union over the operations (allegedly illegal)of taxi aggregators, Ola and Uber. These strikes affect the maximum city very much, as the city typically relies on taxis (autos as well) , for their last mile connectivity to their offices, trains stations and bus stops. The basic demand of the taxi unions is to bring Ola/Uber under the garb of state regulations.

Aggregators basically work as ride connectors, they match riders and drivers. The fares are typically based on per km basis and distances determined by GPS locations, which nowadays are very accurate. This has made booking a cab a breeze and become very popular with consumers. The deal is sweetened by huge subsidies given by these operators to grab market share and log more rides on their system.  This has led to an erosion of revenues of the licensed taxi-operators, and also includes radio-taxi operators like Meru, Tab-cab, Easy cab etc.

This is the reason why the taxi unions are opposed to Uber/Ola.Since the consumers have more choice, they have moved en-masse to the newer age operators , thus ditching poor quality services of the incumbent service providers.They also oppose the concept of surge pricing which they themselves are accused of imposing on wary customers when they alight from railway stations, bus stops, airports etc.

As Raghuram Rajan and Luigi Zingales in their book Saving Capitalism from the Capitalists write “Those in power-the incumbents-prefer to stay in power. They feel threatened by the free markets.”

They further write, “The identity of the most dangerous incumbents depends on the country and the time period, but the part has been played at various times by the landed aristocracy, the owners and managers of large corporations, their financiers, and organised labour“(Bold emphasis mine)

In this case the incumbents (taxi unions) are clearly rattled by the shakedown in their bread butter markets, now want to slam these newbies by the stick of protectionist and monopolist laws designed to keep the market lop-sided and anti-consumer.

To be sure, there is some merit their objections. This is because in the absence of any specific laws governing, ride aggregators, companies like Ola and Uber,  operate by using taxis under the All India Permit (AIP). How this works is Uber/Ola just hire AIP taxis for ferrying customers from point to point. This was brilliant as this move prevents them (ride aggregators) from being under the purview of the archaic motor vehicles act.

Some state governments , buckling under the pressure from unionized taxi cartels (I’ll call then cartels, because they behave as such), have legislated laws to encircle such disruptors. For example in Karnataka,  the state RTO, has made some rules mandatory to be followed like installation of GPS, giving physical prints of bills and having a complaint registers, which is a bit strange as rides are tracked by both the rider’s well as drivers’ cellular phone and feedback mechanism is in-built into these apps already. As per news reports, Ola has been issued a license under the new guidelines in Bengaluru. But Maharashtra is planning to bring in legislation that basically fixes the fare charged by all taxis. This is the most insidious part of legislation , that handcuffs taxi operators into charging very high fixed fares, thus defeating the very purpose of affordability of semi-private modes of transport.

Ola and Uber essentially subsidize the drivers as well as consumers in order to grab market share. This meant offering lower than legislated fares. It’s this what has infuriated the cartels in metros. Using aggregators necessarily means using GPS guided trips and transparent fares, something the other side is loath to.

But while the cartels cozy up to the state governments, why isn’t the consumers voice heard? It’s because consumers aren’t enough of a vote bank and aren’t unionized as these cartels are. Just alight any of the major railway stations, and one is almost assaulted by rogue taxi drivers and makes the travel particularly frustrating. They always ask for inflated fares and often grease the palms of the railway cops so that they look the other way. Meanwhile the fleecing continues. The sight is most sordid at night where this hounding exacerbates and they almost drag you to their vehicles. For women and aged citizens, it’s a hellish experience.

The system is basically rigged in favor of the cartels. In Delhi, to where I frequently travel to by train, policemen are actually waiting at the entrance to stop and fine Ola/Uber cabs. This makes them reluctant to  take rides there (drivers don’t refuse rides as much now, but harassment remains unabated). Unlike cartel cabs/autos, private cabs are forced to park far away from the station and equally frustrates drivers and riders alike. In Mumbai, the loot goes one step further, even radio cabs , which hold state government licenses, are prevented to enter the station premises forcing people to just pay these rogue taxis their pretty penny or walk a kilometers dragging luggage to their waiting rides.

One might figure that it’s better to use prepaid taxis for rides as there is no wrangling involved for fares afterwards. But prepaid taxis stand for prepaid robbery. Once for a distance of 10 km from airport to home, I ended up paying close to 500/-. All because I took the prepaid taxi.

So much for convenience and safety.

Our airports fare no better, the prepaid taxis charge amazingly opaque fares, for lousy taxis which are more fit for the scrap yard. True one can hire a Meru or any radio taxi, but the funny part is the bill they generate is so bad, the customer can’t understand how the fare was calculated in the first place. Delhi flexes its protectionist muscles by charging ₹150/- just to enter the terminal premises ( this is for T3 terminal at IGI airport, not sure about the one at Mumbai,though). This is known as leveling the playing field.

One needs to understand the situation in Delhi is equally dire. This is because the city doesn’t have efficient taxis like Mumbai does, nor do they follow meters ever as is the case with the maximum city. Clearly the policy decisions need to involve more consumer activists as end-user pays for the service in the end.

Let’s make things clear, Uber/Ola make our lives very easy by making commute bearable and easy on the pocket. In fact, in some cases it’s cheaper to ride them than own a car (read more here)

Governments need to balance the need to regulate new age industries as well avoid stifling by giving into protectionist tendencies. This will pave the way how India commutes




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