Court supports Uber, Ola discounts: Good for consumers but bad for the business

Consumers will continue to remain king with regard to Ola and Uber as the Delhi High Court has said giving discounts is not a problem and the courts can’t step into that arena. However, from the point of view of doing business, it may not be a happy development.

“No business can look at discounts as the best possible solution,” says Santosh Desai, managing director and CEO, Future Brands and a commentator on social issues. This is simply because, any business wants price flexibility. Since the court has not stopped taxi aggregators from not giving discounts, to that extent it allows them leeway. But when it comes to price increases, it has to be remembered that these companies are not permitted to do surge pricing.

 Court supports Uber, Ola discounts: Good for consumers but bad for the business

Image: IBNLive

Competition seems to be a bad word where local transport is concerned. That is not true, says Rakesh Agarwal, CEO, Magic Sewa, an online cab aggregator in Delhi-NCR who filed a petition against Ola and Uber. “We are not against competition per se, but it has to be healthy,” he says.

Any new player with a new business model will disrupt the market if the local players cannot provide services that are found satisfactory by customers. Then existing players will try and limit the newcomers. Desai says that what irks the local players is that they have to operate under an existing framework which does not apply to the newcomers. Then a certain pull and push will be at play and that is part of a market adjustment process, says Desai.

Customers, however, will be happy. Desai points out for they see a value in the services. “When you get services at price points that were not available earlier and access and convenience offered is unparalleled, then there is a great value in aggregators,” he says. No wonder then that customers will be happier to pay less to get much more from the aggregators.

Analysts point out that it will be difficult to find customers who are happy with local transport services in any part of the country. Agarwal concedes that the attitude of the drivers of local transport services is not good and that they do overcharge, which is an issue. However, he says, that cannot be a reason to allow taxi aggregators to flout the law and conduct business disrupting the industry.

Asheeta Regidi, a lawyer with a specialisation in cyber laws, that the problem is that there are no rules to regulate pricing for aggregators. “Karnataka and Delhi are the only states to have specifically prohibited surge pricing. Other states are in the process of drafting regulations. In India, the Ministry of Road Transport and Highways issued an advisory to the state governments in October 2015, recommending that they lay down the terms for the regulation of aggregators. On the issue of fares, the advisory stated that the state governments could notify the maximum fares to be charged.”

Until there is clarity from the state governments on what should be minimum price that aggregators can ply on and below which they cannot go, this business model will continue much to the fury of the local transport services.

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Updated Date: Aug 31, 2016 14:05:13 IST