 "Uber")
Arvind Kejriwal is right in banning surge pricing by taxi hailing apps Uber and Ola since they claim to be an answer to the inefficient and archaic public transport systems in cities. Commuters want stability in their travelling costs, not volatility that burn a hole in their pockets.
Uber and Ola claim that using technology, they are building a business to reduce inefficiency in the existing transport models. The idea is that cabs should get more rides so that they can bring down the price of each ride, which, in turn, will get more people to use cabs.
This is the reason there are thousands of new cabs on the roads and millions of commuters are using them. Their model was to ride on the network effect - more drivers on the platform get more users to ride with them. To aid their strategy of building the network faster than the competition, they are burning billions of dollars to ensure the competition is eliminated.
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For example, in the US, Sidecar, an on-demand hailing company shut shop, saying they could not match Uber's insane spending. Now, to claim that their business will not be viable without surge pricing is absurd. Both Ola and Uber are burning hundreds of crores of rupees on incentives to drivers to do more rides.
The initial plan was to encourage more drivers on their respective platform but that is becoming a millstone around their necks. The drivers, who depend on incentives to earn as much as Rs 80,000 a month, are simply not willing to pick up passengers from traffic-prone areas given that they lose out on the number of rides on a given day.
Now, to fix their heavily incentive-dependent business models, both Uber and Ola have turned to surge. It is a catch-22 situation they are in. If they reduce incentives, drivers will leave their platform and if there is surge, customers will walk away.
Why should ordinary commuters pay for the monster Ola and Uber have created? Their premise to lure customers on their platforms was to use the efficiencies brought by technology would reduce their ride costs. Then why the surge?
