Making Rules for Aggregators: Is there an Issue

Making Rules for Aggregators: Is there an Issue​

By: Amit Bhushan Date: 10th May 2016There are many state governments that are in the process of establishing rules for Cab-aggregators which may soon include other forms of transportation. Basically such aggregators were successful in opening up the market from the old henchmen and of course this may not be liked by all. Then these aggregators were seen to be charging "Extra" when the demand was a bit more robust and thus making money for themselves rather than giving "free service" which the political class always wants delivered from such commercial enterprises.
Now as far as public opinion is concerned it would also love to have "free service" rather than allowing surge charge as well as a cap on "Hailing" charges. There of course is no outcry when these aggregators were distributing freebies and coupons to popularize the service. However regulation in such cases, leads to the revenue model for the services coming under attack. The government is politically refusing to figure out that if such aggregators are too profitable and not sharing these with actual service providers or taxi operators, then there would be market economics that would automatically come into play.
Too profitable aggregators will lead to a surge in the number of aggregators while more money in taxi driving means more taxis which would bring down the price (subject to taxi license issuance by government). While no legislation may not be appropriate, however it would be better regulated at municipal level where the municipality is allowed some fee on normal service while somewhat more significant fee on surge or Hailing charges. The aggregators (including their staff) pay or are supposed to pay income tax (if not service tax, possibly), and so the centre benefits.
The taxi drivers pay road tax to the state and parking charges to municipalities (wherever applicable). Since surge adds to the benefit of drivers so let municipalities benefit some more at the cost of consumer. There is no impact of "road" service consumption of surge anyways. The percentage can vary depending upon each municipality’s own circumstances. The consumers are anyways either a resident or a guest (of someone) in the municipality and this allows the municipality to build some revenues rather than relying on the state. The same can be true for hotel aggregators or other service provider aggregation business. This would also ensure that these aggregators are expanding municipality-wise rather than treating entire state as an entity whereas services rendered only in a few areas.
Why this is because it would set competition amongst municipalities to attract more such services not only in say taxi or hotels but also in other areas. The consumer benefits as he would get reliable service from a locally registered operator while India gets to see a rise of more services in an orderly manner. There could be controls at central and state level as to how much municipalities can tax the services, rather than blanket regulations which kill incentives for operators so that entire ecosystem can prosper. These services rise anyways due to demand in market and surge depicts market’s readiness to absorb charges in a competitive market place and municipalities will hopefully ensure competition.
In absence of such well managed operators, the taxi drivers may earn a higher incentive without the government benefiting from it or consumer benefiting from it as a demand-supply rule, which the governments cannot wish away. So what is needed is how to regulate rather than simplistic solutions that political parties may want to dish out. With matters going to courts, hopefully the laws of natural justice as well as constitutional justice will show up.

 

[Dhruv Bindhani]

Making Rules for Aggregators: Is there an Issue​

By: Amit Bhushan Date: 10th May 2016There are many state governments that are in the process of establishing rules for Cab-aggregators which may soon include other forms of transportation. Basically such aggregators were successful in opening up the market from the old henchmen and of course this may not be liked by all. Then these aggregators were seen to be charging "Extra" when the demand was a bit more robust and thus making money for themselves rather than giving "free service" which the political class always wants delivered from such commercial enterprises.
Now as far as public opinion is concerned it would also love to have "free service" rather than allowing surge charge as well as a cap on "Hailing" charges. There of course is no outcry when these aggregators were distributing freebies and coupons to popularize the service. However regulation in such cases, leads to the revenue model for the services coming under attack. The government is politically refusing to figure out that if such aggregators are too profitable and not sharing these with actual service providers or taxi operators, then there would be market economics that would automatically come into play.
Too profitable aggregators will lead to a surge in the number of aggregators while more money in taxi driving means more taxis which would bring down the price (subject to taxi license issuance by government). While no legislation may not be appropriate, however it would be better regulated at municipal level where the municipality is allowed some fee on normal service while somewhat more significant fee on surge or Hailing charges. The aggregators (including their staff) pay or are supposed to pay income tax (if not service tax, possibly), and so the centre benefits.
The taxi drivers pay road tax to the state and parking charges to municipalities (wherever applicable). Since surge adds to the benefit of drivers so let municipalities benefit some more at the cost of consumer. There is no impact of "road" service consumption of surge anyways. The percentage can vary depending upon each municipality’s own circumstances. The consumers are anyways either a resident or a guest (of someone) in the municipality and this allows the municipality to build some revenues rather than relying on the state. The same can be true for hotel aggregators or other service provider aggregation business. This would also ensure that these aggregators are expanding municipality-wise rather than treating entire state as an entity whereas services rendered only in a few areas.
Why this is because it would set competition amongst municipalities to attract more such services not only in say taxi or hotels but also in other areas. The consumer benefits as he would get reliable service from a locally registered operator while India gets to see a rise of more services in an orderly manner. There could be controls at central and state level as to how much municipalities can tax the services, rather than blanket regulations which kill incentives for operators so that entire ecosystem can prosper. These services rise anyways due to demand in market and surge depicts market’s readiness to absorb charges in a competitive market place and municipalities will hopefully ensure competition.
In absence of such well managed operators, the taxi drivers may earn a higher incentive without the government benefiting from it or consumer benefiting from it as a demand-supply rule, which the governments cannot wish away. So what is needed is how to regulate rather than simplistic solutions that political parties may want to dish out. With matters going to courts, hopefully the laws of natural justice as well as constitutional justice will show up.

This 2016 article by Amit Bhushan discusses the ongoing debate surrounding regulations for cab aggregators in India, particularly focusing on the implications of state governments imposing rules on their operations, especially concerning "surge pricing."

Bhushan argues that while these aggregators democratized the market from traditional taxi services, the political class and public often resist surge pricing, desiring "free service" despite enjoying initial freebies and coupons. He contends that excessive regulation risks undermining the aggregators' revenue model.

The author suggests that market economics would naturally regulate the industry: highly profitable aggregators would attract more competition, and increased earnings for taxi drivers would lead to more taxis, ultimately bringing down prices (contingent on government-issued licenses). Instead of blanket legislation, Bhushan proposes municipal-level regulation, allowing local bodies to levy fees on both normal and surge services. This approach would incentivize competition among municipalities to attract such services, benefitting consumers with reliable, locally registered operators and generating revenue for municipalities.

The article emphasizes that demand-supply dynamics are unavoidable and that surge pricing reflects the market's readiness to absorb charges in a competitive environment. It concludes by advocating for nuanced regulation that fosters a thriving ecosystem rather than simplistic solutions that stifle innovation and market incentives, hoping that judicial intervention would uphold principles of natural and constitutional justice.