Bangalore, Delhi ram the brakes hard on Uber

Right when commuters across Bangalore and Delhi were settling into their daily routine of quietly sipping a beverage while surfing, chatting or reading in the cool clean environs of an uberX, moffusil taxi unions and militant state governments have taken a sharp U-turn and pulled the brakes hard.

Incidentally, Uber is the pioneer of the taxi-hailing app business and at $68 billion it's also the most valuable start-up in the world. Bangalore, Delhi and Mumbai are its largest markets in India, where overall it has managed to increase its market share from a paltry 5% last year to about 50% currently vis-a-vis arch nemesis Ola.

Things have deteriorated pretty badly in Bangalore. First the state transport department went on a rampage seizing taxis affiliated to both Uber and Ola and threatened them to go off-road if they do not comply with new licencing norms. Now,  Uber alleges that its application for this very new licence is getting repeatedly rejected on a suspicious technicality. This when arch rival Ola's similar application is getting promptly accepted.  

"There is no discrimination, if Uber submits the right documents in the right form why will we not grant a licence? let them submit it properly, all this talk of us supporting Ola is baseless, we do not discriminate," said Rame Gowda, transport commissioner, Bangalore.

"Since these guidelines have been issued we are waiting to grant them a licence which we will if they provide proper documents to the right personnel, " Gowda added.

Uber begs to differ, a report in The Economic Times, on Thursday quoted Uber executives as saying that the transport department did not accept its documents, " They refused to accept our documents or even acknowledge our document submission." Uber has now sent all the documents through speed post so that it can get an acknowledgment of the dispatch.

These new licensing requirements were framed and notified earlier in April this year at lightning speed by the transport department given the normal excruciating delay that all new regulations routinely take.

According to the department, these new guidelines are largely focused at controlling the dreaded 'surge pricing' and to ensure passenger safety. Although sources close to these developments say that these new licensing norms have been imposed to appease city taxi unions that are suffering, now that both Ola and Uber have become immensely popular in the city.

A charge that Gowda denied when Asianet Newsable spoke to him earlier, "There is absolutely no truth to that. We are encouraging drivers and are ready to grant them both city and state permits. We, however, prefer that they do not sign-up with these aggregators (Ola and Uber) as they unfairly charge and extort from consumers under the guise of surge pricing."

Surge pricing has also been a major flash point in Delhi as last month Delhi chief minister Arvind Kejriwal said,  “Surge pricing is daylight robbery. No responsible govt can allow that, some taxis saying they will not provide cabs if they are not allowed to loot. This is open blackmailing and govt will not let that happen."

So not surprisingly Uber is not having it easy in Delhi either,  as earlier this week, a local court pulled up Uber for allegedly operating without valid licenses and issued a fresh notice to its co-founder and CEO Travis Kalanick, a month after the Delhi government challaned him for operating as a travel agent without government licences. The court has even issued a notice instructing Kalanick to appear before it.

Also on Thursday, auto and taxi drivers in the capital have written an open letter to Kejriwal demanding a ban on app-based taxi services, claiming these cabs are causing huge losses to them by eating into their businesses and leaving them  unemployed. Bangalore too has seen sustained protests by taxi unions that are unable to compete with Ola and Uber's  rock-bottom prices.

So clearly the battle lines are drawn and both sides have closed ranks,  the old order seems to be winning for now given its usual political clout versus the basic needs of an average commuter.  'Surge pricing' is their  favourite bashing bat. Surge pricing is a specific pricings strategy that Uber has pioneered, it allows Uber and Ola  to raise fares in a specific area when demand is higher than supply. Under constant fire from consumers and governments, Uber defends  surge pricing by saying that it helps in increasing the number of drivers on road when demand peaks.

In fact earlier this month, after speaking to a cross section of commuters who regularly use Uber and Ola, Asianet Newsable had asked Gowda,  that if commuters are ready to pay surge pricing, why does the government interfere? Especially as Ola and Uber are not charitable trusts but companies that can devise their own pricing strategies, Gowda had said, "It is the government's job to protect consumer interest, the final choice is up to them. We have to enact and enforce laws that can benefit the overall commuting public and not just a select few who can afford to overpay."Both Bangalore and Delhi have now regulated surge pricing.

Although a general Tsunami of regulations have been unleashed by the central government on both Ola and Uber since they launched, in the recent past Uber has been the favourite punching bag. A fact that does not bode well for Uber as after China, India is its largest growing market. Being a relatively late entrant, Uber has made its financial muscle count and is now available across 26 Indian cities with 250,000 drivers using the platform..  

As independent verified numbers are hard to come by and both Ola and Uber claiming market share supremacy, it's difficult to ascertain whose king, but it is safe to assume that with its recent Ola Micro offering, Ola has trumped Uber. 

But despite trailing Ola in numbers, there is no doubt that Uber has shown an astonishing growth in India, largely due to its  deep pockets which enables it to offer the most attractive incentives to drivers, as it pays them extra for achieving a certain number of rides and for keeping its app open throughout the day. The logic is simple: the more you work with Uber, the more you earn.

Also unlike Ola, which has fixed fares, Uber significantly increases prices when it imposes surge pricing, sometimes charging customers twice or more the regular fares. This also helps boost driver earnings. To be sure, Uber is burning cash by the bagsful in India, as every ride you take on its platform is subsidised by a good 50%.

So as usual it is the 'common' commuter in Delhi and Bangalore who will be forced to revert back to the days of yore when auto and taxi drivers held them to ransom only because their governments are insisting that private companies should run charitable non-profit cab services.