Ola and Uber prices to be regulated; who are the winners?

Government has started to cap prices and create other rules for the service providers.

The centre has released norms which regulate the service providers like Ola and Uber. On November 27th the government released a document titled "Motor Vehicle Aggregator Guidelines". Aggregators are firms which are mediators between producers of a service and consumer. The regulations are focusing on improving the conditions of the cab drivers and bring down the cost for the consumers.

One of the guidelines has put an upper cap on the prices that splurge during heavy consumer traffic. The norms are also increasing the amount of commission given to the drivers and reducing the amount that stays within Ola and Uber. This is the first time that the government has ever regulated the app-run aggregators.

The regulations cap splurge pricing, as the demand for Ola and Uber cabs, increase the dynamically charging companies also raise their prices. Now the regulation will stop the price to rise to only 1.5 times of the base price. They are allowed to sell it at as low as 50% of the base price.

There are a lot of states where there are no regulatory government overseeing these aggregators, so the guidelines are setting a base price of Rs. 25-30. This can be further fixed at a different price by the state government. Simultaneously, the aggregator trade unions have been complaining about how the commission is being skimmed for the employees.

Initially, the drivers were able to make Rs. 90,000-1 Lakh every month, since 2015, but their earnings have reduced to about 50-60% today. Previously after paying taxes, the drivers will have about 74% of their ride fees. Now they will end up having about 80% of their revenue. Ola and Uber like aggregators will have to provide the drivers with Rs. 5 Lakh of Health Insurance and Rs. 10 Lakh worth term insurance.

Health Insurance are insurances that cover medical costs. Term Insurance is life insurance for a fixed amount of time, so in this case, the beneficiaries receive the funds only during a given term. However, not everything has been good; the drivers are now not allowed to work more than 12 hours in a day. If a driver does do so, then they will have to take a 10-hour break compulsorily.

For cancellation of the ride, the cancellation fees will be at 10% of the ride fees and cannot exceed Rs. 100. The government can also suspend the cab aggregator's licenses for a specific amount of time if any of the regulations are broken. The license can be terminated if the Aggregator receives a suspension within one financial year. The rule will also set a service for allowing Female Passengers to chose carpool rides with only females.

The government is making a bold move by regulating these giants for the first time. It does make things better for the employees, but they also are limited to a set amount of time to work a day. It does have short-run drawbacks in terms of political image and sales revenue for the drivers. Drivers who work for more than 14 hours a day and have been able to make an extra Rs. 200 for the additional 2 hours now cannot do so.

So they have a reason not to appreciate the decision, but I do believe that they are more than happy about the overall result of the regulations. Their commission increases so are their disposable income. The proactive nature also showcased by the government in addressing women safety is a positive outcome fo the decision.

I believe that this is the right decision for the nation. The regulation would increase the amount of funds with the employees who can then raise their consumption, thus, becoming a method to help bounce the economy out of this slump. There are many good things which are being done through this regulation. A step which we did not know we wanted but one we needed.