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Ola, Uber and other cab aggregators can charge upto three times the base fare under the surge pricing banner. As part of the new Motor Vehicles Amendment Act, the central government is permitting cab aggregators to revise their surge pricing and increase it. The new regulations for cabs are still being drafted.
According to ETAuto, the new motor vehicle law considers cab aggregators as digital intermediaries or marketplaces. This is the first time that the government is recognising cab aggregators as separate entities.
Hence, the government is now making regulations for these companies to function perfectly. As part of these policies, the government is also setting a cap on surge pricing and it is said that the cap could be set at three times the base price.
Surge pricing is a pricing strategy in which businesses set flexible prices for products or services based on current market demands. When it comes to cabs and taxi services, surge pricing is when the prices increase or decrease based on the demand.
Demand for cabs usually increase during peak hours and in certain situations like when it rains. During this period, cab aggregators are allowed to increase prices and this can happen while the customer is already in the cab and taking the ride.
Karnataka was the first state in India to regulate cab aggregators. The state had set the surge pricing cap at 2.25 times the base price for luxury/premium cabs and 2 times the base price for smaller cabs.
Now, the government is planning to centralise the regulations with the cap proposed to be 3 times the base price. Both Ola & Uber had been pushing the government to allow an increase in surge pricing.
If the new policy is implemented, cab aggregators will be happy with the extra pricing. However, consumers are the ones who would suffer. According to the report, consumers' biggest grouse with cab aggregators was surge pricing.
Nearly 49 percent of the people involved in a survey were of the opinion that surge pricing should be capped at 25 percent of the base fare. 45 percent said that surge pricing should be banned altogether.
In favour of the increase in surge pricing, cab aggregators argued that more cab drivers will choose to ply at busy hours. This way, customers wouldn't have to wait a long time for cabs to be available during rush hours.
Thoughts On Uber & Ola Surge Pricing Increase Due To New Government Policy
Cab aggregators like Uber and Ola feel that an increase will benefit drivers. Well, drivers might be benefited and the companies will surely be benefited. It is consumers who will end up coughing up more money for the same distance.
This move could also lead a large percentage of cab drivers to operate during rush hours so that they would benefit from the surge pricing. However, this could lead to a shortage of cabs at other hours.
A higher surge pricing could also cause trouble when a customer has just enough money to pay the charges displayed on the app while booking it. Once he/she gets into it, if the surge pricing becomes too high, it wouldn't be affordable for some. The government and cab aggregators will have to make an informed decision.