No official notice to halt car-pooling in Karnataka: Ola, Uber sources

Ride sharing companies will need to maintain a fine balance between meeting the demands of the customers as well as the needs of their partner networks, say analysts

At a time when tech companies and startups in India have kick-started a revolution in the country for building top innovations, issues related to government policies are presenting a huge challenge to these firms. Ride-hailing firms were in for a major shock on Friday after it was reported that Karnataka Transport Department has directed ride-hailing companies Ola and Uber to withdraw car-pooling feature from their mobile applications immediately.

However, sources at these firms on Saturday said they have not received any official communication or notice from the Karnataka Transport Department to halt car-pooling service.

“The company has not received any formal communication or notice from the government to halt the car-pooling service,” said a person at Ola, who did not wish to be quoted. “Traffic is one of the biggest problems in Bengaluru and car-pooling helps to reduce it. We are still trying to figure out the issue created by this service as Ola has been running it for a very long time and the customers are also promoting it a lot,” he said.

Ola and Uber continued to offer the ride share option on their platforms on Saturday, a day after reports said they were directed to stop the service as it violated the Karnataka On Demand Transportation Technology Aggregators Rule, 2016.

Industry sources said that various taxi unions were not happy with the car-pooling services of Ola and Uber. They had brought up the issue to the Karnataka Transport Department to stop it. “Driver union had complained about earning less money due to the carpooling service,” said a person who did not wish to be quoted. “But they want to continue driving vehicles on the ride-hailing platforms.”

Founded in 2011 by Bhavish Aggarwal and Ankit Bhati, Bengaluru-headquartered Ola now has a presence in 150 cities across India, UK, Australia and New Zealand. It currently serves more than 150 million users and is close to completing over a billion rides annually. The firm has raised $3.8 billion so far from global investors including SoftBank. It aims to create over 2 million livelihood opportunities in the mobility ecosystem by 2022.

Industry analysts said that there is no clarity on issues such as car-pooling from the central government to determine what is legal and what is not. “If you look at carpooling, all of us have been to railway stations and religious places and shared taxis are a norm there. There are even shared taxis for employees to reach offices. So, the concept is not illegal,” said Madhur Singhal, managing director at management consulting firm Praxis Global Alliance. He was of the view that such issues are prone to get “exploited” as they have not been explicitly explained by the government, especially in the context of Ola and Uber.

For instance, experts said autorickshaw drivers in places such as Bengaluru can have issues with car-pooling services. The drivers using the ride-hailing platforms themselves could feel that they are not getting their due from such services.

The whole business rationale for car-pooling was to make the ride cheaper for passengers and enhance income-per-trip for drivers. Analysts said, while the fare for the riders has probably come down, the income for the drivers has not necessarily increased. The drivers are also facing basic operational challenges such as customers not being present at the pickup locations.

“Given that the stakeholders themselves are not that enthusiastic about car-pooling, the subject is easily open to exploitation,” said Singhal of Praxis. In certain states and cities in the country, the influence of local taxi and three-wheeler associations combined with the no resentment from the drivers for the elimination of the carpooling service creates a “fertile ground for a local authority to issue a diktat to stop such a service,” said Singhal.

Ankur Pahwa, partner and national leader, e-commerce and consumer internet at EY India, was of the view that the pace of innovation has always been faster than the pace of regulation. He said this is increasingly coming to notice and creating disruption and hindrance in providing services to a large number of customers dependent on them.

However, he said it is interesting to note that the drivers' association has come out in support of the recent circular on banning the ride-pooling service as this does not incrementally help the drivers in terms of net earnings. In fact it adds to the woes for the drivers in terms of logistics and there is an issue related “to the safety of women passengers,” said Pahwa.

Experts say that there are learnings for the industry from the challenging initial public offerings for companies such as Lyft and Uber, about how drivers are a very important part of ride-hailing business and they need to be valued. They said ride-sharing companies will need to maintain a fine balance between meeting the demands of the customers as well as the needs of their partner networks.

Pahwa said safety is certainly an important issue that these companies need to address more proactively for the car-pooling segment, including profile verification and peer ratings. Dedicated car-pooling services such as Quick Ride and SRide have already implemented such measures.

In the future, it will also help if these companies liaise more closely with government departments to limit disruption of services which impacts all related parties.

“These companies are serving mobility obligations that the government should be providing themselves. So they should be encouraged with certain checks and balances in place,” said Pahwa.

This is not the first time that ride-hailing firms had to face heat from the government. In March, the Karnataka government had banned the services of Ola for six months in the state, after the state transport department found that the firm was operating bike taxis ‘illegally’. The order, issued by the department on March 18, said the licence granted to ANI Technologies (Ola’s parent company) had been suspended for six months, under the provisions of ‘The Karnataka on Demand Transportation Technology Aggregators Rules, 2016.’ It had added that the firm was using its existing cab aggregator licence to promote bike taxi services.

Besides Ola, this year another start-up Rapido — which runs a bike taxi platform — had come under the radar of the Karnataka Transport Department. This year, transport officials seized hundreds of bike taxis that were being operated by various aggregators, as part of a drive against running bike taxis illegally. Officials pretending to be customers had booked bike taxis through the aggregator platforms and caught the two-wheeler owners. Most of them were unaware they were violating the law but faced action.