Police Seize Ola-Uber Cabs In Bangalore For Surge Pricing; Is Govt. Destroying Free Market Fundamentals?


Uber Surge Pricing

In a clear cut case of violation of the ‘free market’ and interference by Government machinery in the working of privately incorporated companies, cabs of both Ola and Uber are being seized in Bangalore.

And the worst part is that, police is encouraging users to file complaints against them, as they have assured that strict action would be taken against them.

The cabs are being seized after Karnataka banned surge pricing in their state as they issued a diktat that such taxi apps cannot charge anything beyond the basic fare. It seems that Maharashtra will soon follow Karnataka in banning surge pricing.

Earlier, Ola and Uber bikes were seized in Karnataka, as they broke traffic rules.

The Sting of Surge Pricing in Karnataka

As per available reports, around 30 cabs from Uber and Ola were seized in Bangalore over charges of ‘over pricing’.

Rame Gowda, Bengaluru-based commissioner of transport and road safety said, “Surge pricing is not in the rules. You have to follow the rules of the land, you cannot violate the rules of the land and harass the public.”

Police is actively encouraging users to file police complaints, in case they witness any such surge in pricing. Gowda has promised that strict action would be taken against these cab booking companies, and have said that ‘operations’ against these companies are still on.

Uber Justifies Surge Pricing

Meanwhile, after the ban on surge pricing took over, Uber sent personalized emails to all customers in Karnataka, wherein they justified their move to increase price, as its based on purely demand and supply rule.

In that email, Uber said, “It’s a bit of economics 101: supply and demand adjust in response to price changes”, adding, “higher prices are required in order to get cars on the road and keep them on the road during the busiest times.”

They haven’t yet responded to the news of their cabs getting impounded by Bangalore police.

Govt. Killing Free Market?

As per the fundamentals of ‘free market’, the prices of goods and services delivered are free from any interference by Govt. or any authority; and the sole responsibility lies between the seller and the consumer.

As per Free Market, whenever there is any need, that need would be met without any external influence of the Govt.

By banning surge pricing, Govt. is actually trying to manipulate the business model of privately registered companies, and thus, destroying the fundamentals of free market.

This fluctuation in pricing works for airlines and hotel industry as well, as the demand-supply ratio dictates the current pricing. In case any customer is not willing to accept that, he is free to chose any other vendor.

But how can a Govt. stop this practice, just to benefit local businesses, who are afraid to adapt and use technology?

As an entrepreneur, do you think this ban in surge pricing is good for the startup eco-system? And, as a consumer, do you support the impounding of cabs?

Do share your views by commenting right here!

  1. Ryan says

    I don’t know how many Driver of Cabs will see or read this,I would like to say this to the Driver’s u driver us around u work hard but don’t for get to respect the costumer that u pick up! To this Government,Rto and Police leave the drivers alone coz U think by fine the driver U will win go after the Company’s not the CAB Driver as the cab driver is doing only what he is told by the company and can u blame the driver he the driver has to pay the lone on the car pay a rent for the house he an his family live in pay for his children education now if U the Government,RTO and Police size his car how does he take care and pay for his Family? A driver to have his car released has to pay from Rs8000 to Rs11000 spot fine to release his car or have the car sized and run to Court and pay Rs3000 now do U The People of Bangalore think this is fair to the Driver’s and think about how much of that money that these RTO or POLICE Poket? I have seen this happen to so many of the driver when they have been stopped by these great RTO AND POLICE how these drivers beg these POLICE and RTO to let them go do u think this is Fair?

  2. Ryan says

    I feel that what the Rto and police are doing to Drivers of cabs is wrong seizing there cabs that is wrong as these drivers work hard and long driving people around in Bangalore these drivers have family to take care of and make payments. Has any one looked at how much of the fine that goes in to the poket of these great RTO and POLICE persons. Yes fine the CAB Company not the Driver these guys are working hard to drive us around they driver to take care of there family’s as long as u don’t fine the company they will keep doing as they want go after them not the Driver. And one has to look at how much money these Great RTO and POLICE Poket on hard working Driver’s. We the People of this great City Bangalore need to think hard coz we are the one that sit in the back seat while these Driver drive us around it is not easy for them and then to face having there cars seized this is WRONG to Ola and Uber work out your problems as this not fair to the Driver that attache there cars to U coz With out These attachments Ola And Uber will be no were!!

    1. DigitalGalaxy says

      I completely agree! The right thing to do is fine the Evil Empire Uber, and other companies that engage in scam-artist surge pricing, not to go after the poor drivers. If the price needs to be higher, then these people can increase it, not use scam-artist surge!! The drivers should not pay the price, but these corporations who are surge pricing!

  3. Ryan says

    Well with all this going on about surge pricing how does the taxi company and driver or owners make there money coz one has to pay the driver, disel and with the jams that one face every day in driving and the cost of disel coz at time a jam takes an hour to get out of. Yes people want to travel by taxi but they find the price is high then how are the drivers or owners to earn things have to be worked out coz every thing is expensive and yet people go and spend on buying things at a high price one does not complain about that. Government talks, police fine and take money half of these official make money of the one that try hard to make a living but we as costumer know only to talk. Well we all should take a hard look at every thing and think before we talk and make problem for the one that drivers us around coz put yourself in they’re place think about that.

    1. DigitalGalaxy says

      If the drivers are not making enough, the solution us to increase the base rate so they will make the minimum wage on average, not to use obnoxious surge pricing. Let the users of these apps know the price up front, even if it is higher, and do not hit them with a huge bill just when they are in a hurry.

  4. […] taxi rivalry in India is turning into a three-way fight. On one hand Government machinery is observing every law and regulation to control their reach; taxi app companies are fighting among themselves […]

  5. Debangana says

    I think all of us quite educated to understand “free market” and basics of how demand-supply works. I have been monitoring these ola, uber apps and have taken screenshots to prove that it’d does not seem like they have been very innocent in administering these demand-supply algorithms. Even if there are many cabs in one particular area, the probability is that you will be asked to pay a crazy 2.3x.
    I am a regular user of both ola and uber since thats the only way of commute for me to and fro my workplace. I have seen surge charges scenarios getting worse day by day. Uber in-fact has employed a strategy of continuously showing surge charges. How is that possible? Its easy to lay down principles of economics but when it comes down to your own pocket, you shall be able to feel the pinch.

  6. […] In a clear cut case of violation of the ‘free market’ and interference by Government machinery in the working of privately incorporated companies, cabs of both Ola and Uber are being seized in Bangalore. […]

  7. Raghavendra says

    We are all not dead against of surge pricing,but limitatation should be there to charge. In my point of view they have to come with new plans.Any way these type of start ups should be more realistic in every corner.

  8. Sreekanth says

    Yet another moronic article in support of ecom by trak.

  9. DigitalGalaxy says

    Good for them! I hate surge pricing!!
    It’s just taking advantage of people in a hurry, it’s borderline embezzlement! Then Uber, the Evil Empire, tries to hide its predatory surge pricing behind “the free market”. If there are not enough Ubers on the roads, give the people an option to pay more to move to the front of the line, or wait and pay the normal fee, don’t take adventure advantage of people who need transport!!

  10. Rajesh Arjunlal Jaisingh says

    We are already forgetting the lessons of the 2008 crash! Free markets are not necessarily the best solution to all the world’s problems – There has to be regulation.

    These services are already a dominant force in the taxi markets and cannot apply runaway pricing. If these apps are so good at managing demand they can direct more vehicles ahead of time to the high demand zones based on surge patterns. There is no need to play with pricing – taxis won’t appear out of thin-air just because the prices went up. Surge pricing is nothing more than a profit-maximization strategy when demand is high and users are left with no options. Someone just had to call the bluff!

    And, just to be clear, the government never stopped Uber or Ola from setting their base prices for their services. They are “free” to set any price per km and let customers decide if they even want to pick them. It is only surge-pricing that is the problem. It is reminiscent of taxis and autos that take advantage of special situations and fleece us when we most need them.

    Alternative: Create a queuing system that provides details of position in queue and estimated time of availability. It is fair and those in a hurry can look for other options or jump the queue by paying a small premium that is not a 2-5x multiple of the standard rates (Economics 101: Businesses are supposed to generate operating profits at their base rates)!

    1. bcp says

      Totally agree on “Free markets are not necessarily the best solution to all the world’s problems”.

      1. user says

        Looks like a Paid article starting from word go it is against regulation/commuters.

        4.8X surge pricing! what the heck!! This is sucking people’s Blood.
        Those cab suckers say 6/- per km to attract users and then suck blood with surge pricing.

        This is cheating, not fair.
        Let them says they will charge 10/- per km (they do charge much more than that in the name of base price + per minute price + peak time price …) and thats it.
        No dynamic hiking price by seeing users in hurry/urgency.

        Surge pricing is cheating, it must stop

    2. Swarup Mohalik says

      Pathetic article. Just mentioning the words like “free market”does not ensure economic sensibility.

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