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  • Sakshar Law Associates

Regulation for Ola and Uber under Motor Vehicle Act - An Understanding

Updated: Sep 3, 2022


Sakshi Shairwal

Shalini Bhatt

Gone are the days when drivers used to act on their own will while canceling rides requested or when the cab aggregators arbitrarily charged thrice the amount of base fare. In December 2020, the Ministry of Road Transport and Highways has issued the Motor Vehicle Aggregator Guidelines, 2020 as per the requirements and provisions of the Motor Vehicles (Amendment) Act, 2019 and further as per the amended Section 93 of the Motor Vehicles Act, 1988. It is mainly meant to regulate the hitherto unregulated cab aggregator segment, which is controlled by mainly two players Bengaluru-based Ola cab and US-based Uber cab. In the guideline issued the government has laid down several procedures about conditions for compliance about vehicles, grant of license to an aggregator, fares regulation, etc.

Why these new guidelines are issued?

Before the amendment (Motor Vehicles Amendment Act, 2019) the term “aggregator” was not included in, the Motor Vehicles Act, 1988. And hence regulation of aggregator was also not there in the act. So to regulate shared mobility and to reduce traffic congestion and pollution, these new guidelines were introduced. Another aim was to provide ease of doing business, driver welfare, and customer safety.

What are the new guidelines for a driver?

This new move of the Ministry of Road Transport and Highways was hailed as a welcome move for the cab drivers. This new rule asked the aggregators to ensure that every cab driver is provided with health insurance integrated with the aggregator for an amount not less than Rs 5 lakh with the base year 2020-21 and it should be increased by 5% each year. Also, 10 lakh term insurance should be provided to every cab driver. The aggregator is also asked to conduct refresher training programs once a year for all cab drivers. At the time of induction of drivers a compulsory five-day training of the cab drivers have to be done which will include topics like provisions of the Motor Vehicles Act, 1988, efficient use of the app, motor vehicle maintenance, careful driving, on-road safety, and first-responder training, gender sensitization, terms and conditions of the contract with the aggregator, etc. These guidelines also mandate that the cab driver will have to receive at least 80% of the fare applicable on each ride, while the aggregator will receive the remaining charges. Earlier for cab aggregators, there was no fixed commission, they could get 20-30% of the earning depending on the ride.

According to experts, this new move of government could secure the minimum earning of drivers while formalizing the entire process.

What are the changes for the aggregators in terms of their application(app)?

This is mandatory for the aggregators to make its application accessible in English and Hindi as primary languages for the rider along with one official language of the relevant state, where the official language is not Hindi. Also, the app should be accessible in a language that is understandable to cab drivers. For the data generated on the app, the aggregators have to store those data on a server in India, and such stored data will need to be stored for a minimum of three months and a maximum of 24 months from the date on which such data was generated. As per the due process of law, such data have to be available to the concerned state government, the guidelines also stipulated that any data of the customer shall not be disclosed without the written consent of the customer.

What are changes made for a customer?

Through the guidelines, the aggregators are now allowed to provide the pooling facility to the customers, whose KYC information and details are available. In the case of a female passenger who wishes to avail of ride-pooling, the aggregator will need to provide those female passengers option to pool with another female passenger. Further, In cases of non-transport vehicles being aggregated for ride-pooling, on calendar day a limit of four ride-sharing intra-city trips and per week two ride-sharing inter-city trips for each vehicle with the driver has been stipulated. There is also a cancellation charge for the riders that is a penalty of 10% of the total fare which should not exceed Rs 100. And that cancellation penalty imposed on the rider will be divided between the aggregator and the driver in the proportion of the decided commission rate.

What are the changes regarding fares?

The guidelines issued say that the base fare chargeable to customers availing aggregator service shall be the city taxi fare indexed by Wholesale Price Index(WPI) for the current year. And for the states where a city taxi fare has not been determined for those states, their base fare will be an amount of Rs 25 or 30. The base minimum fare chargeable to customers will be for a minimum of 3 km to compensate for dead mileage and fuel utilized and distance traveled for picking up the customers. The aggregators are allowed to charge 50% less fare than the base fare and allow them to impose a maximum surge pricing of 1.5 times the base fare. The government took these steps to promote asset utilization, which is the fundamental concept of transport aggregation and also to substantiate the dynamic pricing principle, which is pertinent in ensuring asset utilization, by the market forces of demand and supply.

As per the expert's opinion, the new guidelines will help in clearing uncertainty regarding the regulation of cab aggregators in India. Drivers will also be beneficiaries of these new guidelines.

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