Ban on surge pricing affects cab supply in Delhi

Ban on surge pricing affects cab supply in Delhi

By AREEBA FALAK | NEW DELHI | 23 April, 2016
An Uber taxi driver shows an application software in his mobile phone used to track the taxi’s location, in New Delhi in December 2014. reuters
‘Surge pricing ensures that more taxis ply on the roads to help meet the increase in the demand of cabs,’ Uber explained
After the Delhi government banned surge pricing by app-based cab aggregators like Ola and Uber, one would expect the service providers to protest the announcement. However, the cab aggregators did not give a clear statement about the ban on surge pricing that is likely to be continued even after the odd-even scheme is phased out. 
In a statement released by the Ola headoffice in Bangalore, the cab aggregator said, “We, as India’s leading mobile app for transportation, announce our support to the Delhi Government’s odd-even initiative by adding more vehicles on its platform to improve availability and reduce ETAs in the state.”
 The company statement said: “We … have revoked Peak Pricing completely in this period. We are also ensuring maximum availability of cabs in Delhi NCR to cater to the increased demand during this phase. We have over 26,000 CNG vehicles in NCT of Delhi and have added more than 1,000 vehicles through our leasing program in the previous week. Additionally, we are also creating awareness and increasing adoption of shared mobility services like cab-sharing through Ola Share and convenient daily commute through Ola Shuttle. We are constantly working on improving availability and reducing ETAs across Delhi-NCR, in our endeavor to make odd-even a success for the state.”
However, a cab aggregator employee said: “It should be understood that the app based taxi services work on a demand-supply module. As a rule, we pay more when supply goes down. To book railway tickets in ‘tatkal’ we all have to pay extra. Similarly, on road there are people willing to pay extra when required. If nobody wants to pay the surge charge, the aggregators’ business will phase out on its own. So, why put a ban on this?” 
The ban came after the onset of the second phase of the odd-even scheme in the city that led to numerous complaints by consumers against surge pricing. Technological experts for such cab aggregators said that surge pricing is algorithm based. 
“The app-based taxi services are run on pricing algorithms. These algorithms are programmed to access demand-supply, distance travelled, time taken and then calculate fare. Surge pricing is the extra money that a consumer has to pay due to the lack of supply at that given time at a given place,” the experts said.
“When the demand for taxis is higher than the number of drivers around, the fare automatically increases.  Surge pricing ensures that more taxis ply on the roads to help meet the increase in the demand of cabs,” Uber explained. 
Surge pricing can sometimes be as high as 7-8 times the regular fare. The cab aggregators say that the price hike encourages more drivers to get back on to the roads and help them earn more money. Drivers make 80% while cab aggregators take home 20% on each ride and the same applies during surge pricing.
However, surveys conducted by technology experts on Uber’s surge pricing trends in the US claim that “surge pricing does lead to a decrease in waiting time for a cab. But to say that it is because more drivers are available on road since the prices went up won’t be absolutely right. What really happens is that surge pricing doesn’t bring more drivers out on the roads, but rather pushes drivers already on the job toward neighborhoods with more demand — and higher surge pricing. As a result, some neighborhoods are left with higher waiting times for a car.”
 In Delhi, the situation is no different. For a majority of consumers it is a problem that they would prefer to be resolved with a ban. “With the odd-even scheme in effect, the role of cab has increased more than ever. Paying 5-6 times higher is obviously inconvenient and a fixed fare chart would solve many problems,” said Meenakshi Shukla, an IT employee.
In order to expand and meet demand, Ola also announced its Shuttle service. “Ola Shuttle will offer ‘Free Rides’ to commuters in Delhi-NCR on upcoming Friday again on 29 April. Free rides were also offered last Friday. The company statement added, “Ola has initiated on-ground awareness campaigns with volunteers from the beginning of the odd-even phase 2, stationed at key traffic junctions, around metro stations and other high footfall areas across the city to encourage and guide users to choose the most suitable ride-sharing option.” 

There is 1 Comment

As consumers, we're hardwired to search for the cheapest bargain when we're shopping outdoors industry. But in this instance, working with the most affordable labor is not the very best offer for you or your older family member. My web page: be a Valentine for a senior - - -

Add new comment

This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.