After HC cap: Uber may restrict auto services in parts of Bengaluru
On October 14, the Karnataka high court placed a 10% cap on commissions, exclusive of GST, charged by Uber, as an interim arrangement to find a consensus between the state’s transport department and app-based aggregators.
Uber India is considering limiting the auto services in some parts of Bengaluru as running the business may turn unviable due to the Karnataka high court’s temporary orders to cap the commission charged by the aggregator at 10%, an Uber spokesperson said on Tuesday.
On October 14, the Karnataka high court placed a 10% cap on commissions, exclusive of GST, charged by Uber, as an interim arrangement to find a consensus between the state’s transport department and app-based aggregators.
Nitish Bhushan, head of central operations, Uber India and South Asia, in a blog post said that Uber will not be able to operate within the current 10% commission cap rules in Bengaluru. “Currently, our commission in Bengaluru is capped at 10% of the fare collected. This is not financially sustainable. If our costs cannot be covered through commissions, we will have to find ways to offload costs that could impact the experience of drivers and riders,” Bhushan said in a statement. “In the face of these commission caps, we may have to make the difficult decision to limit Uber Auto to select parts of Bengaluru where the service is viable. This will hurt drivers and inconvenience riders who depend on aggregators for their commuting needs.”
Uber said the commission it charges is used to cover costs of value-added services — including GPS tracking, safety helpline, phone and in-person support, rider and driver on-trip insurance and law enforcement response assistance — besides investing to build and operate the platform that includes tech and engineering expenses and marketing spends to bring onboard more drivers and riders.
“Facilitating a market is not free. Commissions are used to cover our costs and make the business model viable. To be absolutely clear: Our commission ≠ our profit. A flexible commission structure, and one that ensures a fair margin for aggregators, will ensure the sustainability of e-hail autos and also encourage investment in the space, leading to the introduction of new features and services,” read the blog post.
“Currently, Uber and other players in the city are operating under a stay order granted by the Hon’ble Karnataka high court after the Karnataka state government announced a ban on aggregators for running autos,” Uber India said in its statement. “We want to work with the government on appropriate fare regulations that build on the benefits that e-hailing has brought to the auto sector.”
The issue began with the Karnataka state government imposing a ban on ride aggregators offering auto rickshaw rides on their platforms on October 10, saying they are not covered under current aggregator rules, along with a ₹5,000 fine on auto-rickshaws plying on roads illegally. At the time, aggregators were also directed not to charge passengers more than the rate prescribed by the government.
This was followed by an interim relief granted to the aggregators by the high court on October 14. However, the court capped the convenience fee at 10%of the base fee along with 5% GST until authorities worked out a pricing mechanism.