(HT file)
(HT file)

Opinion | Resist the urge to ban surge pricing

An efficient market is one where prices vary by demand and supply. A clamp-down on this mechanism would force these services into a price-control regime

India’s Motor Vehicles (Amendment) Bill, 2019, shall bring app-based cab-hailing services such as Ola and Uber under Central regulation. Described as “digital intermediaries", these apps are to be treated as marketplaces or platforms that enable cabs and customers to strike deals for rides. Until now, various states had taken their own measures to frame regulations for their services. Now, operating permits will still be issued by state governments, but they will need to operate under common rules and guidelines specified by the Centre.

Some of the Bill’s aims would please users of cab-hailing apps. Perhaps the most salient feature is a provision to regulate on such practices as “surge pricing", a system under which the proposed fares cited by an app go up in accordance with rising demand (it works the other way round too). Customers have complained that rush-hour fares tend to be unreasonably high. If there is an attempt to exert monopoly power to fleece people, then it would deserve a look-in. Else, fares that rise and fall by traffic need not alarm anyone. That is what a marketplace is. Not just that, it is at the crux of the innovation offered by these companies: an efficient market is one where prices vary by demand and supply. A clamp-down on this mechanism would force these services into a price-control regime. So long as there is sufficient competition, we should let variable fares work.

The rather more welcome aspects of cab regulation concern passenger safety. Norms for driver recruitment are expected to tighten, and a closer track kept of their movements and antecedents. This sounds reassuring. But still, the extent of an app’s liability in case a woman is harassed by a cabbie remains unclear. Will the company be held accountable? Or are the police expected to nab would-be wrongdoers well in time?

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