Batting for regulating foreign capital inflow in cab aggregators in the country, Management Development Institute (MDI) today said such a move would stop companies from competing on price front alone.
In its recommendations to the government, MDI, however, supported the surge pricing strategy saying it provides a competitive advantage to application-based cab aggregators (ABCAs) and makes this market attractive for new entrants.
"In the benefit of ABCAs, incumbents, drivers, consumers and taxi industry as a whole, it would be prudent if the capital flowing from abroad in this sector is regulated so as to stop companies from competing on price alone," MDI said.
Stating that it is not in favour of removal of dynamic pricing completely, MDI said there must also be measures to check over-incentivising of drivers.
"The companies need to compete on parameters other than prices such as innovation, localisation, service quality, reliability etc. One option is that ABCAs should not be allowed to price their services below the cost," it said.
The taxi space in India has been witnessing a phenomenal growth in the past 6-7 years. Over USD 400 million (Rs 2,400 crore) of venture capital has been pumped in into these companies in the past 4 years.
The Indian radio taxi market alone is pegged anywhere between USD 6-9 billion and is forecasted to grow at 17-20 per cent annually.
On surge pricing, the report said restricting surge pricing completely may stifle the innovative strategies adopted by these emerging business models.
"We recommend that surge pricing may be permitted, subject to certain restrictions, such as a limit on the multiplier (say a maximum of 3), prohibiting surge pricing during emergencies, etc," it added.
The recommendations also called for the government to take into account the inclusion and continuation of existing mobility solutions like black and yellow taxis and autorickshaws.
"Any regulations imposed should create a level playing field for all players and prevent practices such as subsidisation of passenger fares that could create entry barriers for them to enter the application based transport services aggregation platform," it said.
Also, steps are needed to ensure passenger safety, protect
consumer interest and keep driver fatigue in check.
"Roles, responsibilities and relationship between drivers and aggregators needs to be clarified. Larger issues like data privacy, anti-competitive tactics, value erosion by capital dumping need to be addressed through adequate policy intervention," MDI Dean (Research and Accreditations) MP Jaiswal told reporters here.
MDI, which surveyed 1,500 drivers and customers across Ola, Uber, Meru and even bike taxi drivers in 5 cities, found better income (63 per cent) and better standard of living (31 per cent) as the primary reason of working with ABCAs.
About 34 per cent ABCA drivers said they collected less than Rs 2,000 on a daily basis, while almost 40 per cent said it was above Rs 2,500.
The survey found 50 per cent or more of the income earned by ABCA drivers are from incentives.
However, only 14 per cent of ABCA drivers said they would continue to work for the aggregators without incentives.
About 55 per cent commuters said they preferred hailing a taxi from a cab aggregator.
A few months ago, Ola had said foreign companies were engaging in "capital dumping" by offering predatory pricing that is not in the interest of co-existence of all players in the ecosystem.
Ola's US-based rival Uber had countered the claim by saying the Indian firm was as foreign a company as Uber given that both companies have raised money from global investors.
