The Karnataka government has declared a standard rate for taxis that operate under aggregator rules, such as Ola and Uber, and also for city cabs, on February 3. The new rate structure will divide taxi vehicles into three categories based on the vehicle’s price.
Vehicles that cost up to 10 lakh will have a base rate of Rs 100 for the first 4 km, and Rs 24 for every extra km. Vehicles that cost between 10 lakh and 15 lakh will charge Rs 115 for the initial 4 km, and Rs 28 for each additional km. Vehicles that cost more than 15 lakh will have a starting rate of Rs 130 for the first 4 km, and Rs 32 for every extra km. The order states that cab aggregators are prohibited from charging surge prices from customers.
Before the new rule, the cab fares in Karnataka varied depending on the type of service and the time of the day. For app-based aggregators like Ola and Uber, the minimum fare for the first 4 km ranged from Rs 75 to Rs 100, and the per km charge ranged from Rs 18 to Rs 2412. For non-app-based city taxis, the minimum fare for the first 4 km was Rs 80, and the per km charge was Rs 19.503. However, these fares were often subject to surge pricing, which could increase the cost by up to four times during peak hours or high-demand periods
EFFECTS ON MARKET –
The cab aggregators like Ola and Uber may see a decline in their revenues and profits, as they are not allowed to charge surge pricing or dynamic fares anymore12. This may affect their valuation and share price negatively.
The city taxi operators may benefit from the new fare structure, as they can compete more effectively with the cab aggregators on the basis of price and service quality3. This may boost their earnings and market share positively.
The customers may also benefit from the new fare structure, as they can enjoy more affordable and predictable taxi rides without paying extra charges12. This may increase their demand and satisfaction for taxi services.
The investors may react differently to the new fare structure, depending on their risk appetite and portfolio diversification. Some may see it as an opportunity to invest in the city taxi operators or other related sectors, while others may avoid the taxi industry altogether due to the uncertainty and regulation.
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