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One of the central themes of the 1991 economic reforms was that the government would not be in the business of licensing new capacity while companies would be free to price their products. The memo still hasn’t reached some state governments. Karnataka’s moves against online taxi aggregators are an example.
The state government may ask companies such as Uber and Ola to take their taxis off the road till they get the requisite licences. This follows the earlier decision to replace surge pricing with prices fixed by transport authorities. The result will be traditional taxi unions once again getting control over their market. Consumers will suffer.
The most potent forms of competition come from new business models, not peers. Regulators are still stuck in the old ways of thinking. Many other countries are also facing similar dilemmas in their taxi markets, but India should know more than them what damage state control over markets can do to the rights of consumers.