Karnataka Govt impounds Ola and Uber Cabs for Surge Pricing

The Karnataka government has seized cars from online cab aggregators Ola and Uber for charging their users over the government decided rate of Rs 19.5/km, reports Mint. The report cited Dr Ramegowda, Bangalore’s transport commissioner, as saying that over 30 cars had been impounded for implementing surge pricing.

We’ve reached out to Uber and Ola as well as the Karnataka transport department and will update this when we hear from them.

Surge pricing is a technique used by both Uber and Ola to increase fares (1.5x, 2x etc.) to provide drivers the incentive of keeping their cab running, while also making it available for the user, no matter how much the demand for one.

  
Government stays cab rate at Rs 19.5/km

Earlier this month, the Karnataka government banned surge pricing, as a part of its rules for online cab aggregators in the state. According to the ET report, multiple cab operators like Uber, Ola, Meru, Mega, Bangalore Taxi etc operate under the Radio Taxi Scheme and not the ‘Karnataka On Demand Transportation Technology Aggregators Rules, 2016’.

Surge pricing backfires

Last week, Uber put up a blog post explaining the need for surge pricing, reiterating what it has been saying since inception: surge pricing allows users to get cabs even on a busy day. However, users haven’t been happy. Most recently, a user saw prices as high as 7.3x in Hyderabad making it impossible for him to get a Uber cab. Despite this, the company states that ‘nearly all’ of surge pricing profits go to the drivers as part of their fares. Aman Garg and Nitish Parnami from Bangalore and Delhi, also started petitions against Ola and Uber on Change to address surge pricing, for which both got over 16,000 and 51,000 signatures respectively.

BigBasket’s pact with offline retailers to hasten deliveries

The desire to rush to the doorsteps of the consumer faster with deliveries seems to compel leading online retailers to acquire more and more market share to strengthen their leadership position. This can be observed from the planning of India’s online grocer, BigBasket, to offer delivery of goods in 60 minutes or less, through collaborations with neighbourhood stores.

BigBasket is cultivating offline partners to secure its dominance as Amazon and other electronic stores pitch themselves closer to shopper’s home. Therefore, it is aiming for significantly higher margins from its branded and co-branded categories, BigBasket will also establish co-branded pickup points as well as sell its own brand of gourmet staples at its partner stores.

For express delivery, the company has tied-up with local stores to promise delivery within an hour of at least 400 items that it has identified as household essentials. These stores will handle the delivery with their own staff, while BigBasket will offer its technology to manage inventory and will pay a service fee to the store for providing facility.

 

“BigBasket will shortly roll out partnerships with about 1,800 neighbourhood stores in Bengaluru, Hyderabad, Delhi, Mumbai, Chennai and Pune. The key to success is to control inventory, ensure products are delivered in time, and restrict order cancellation to a minimum”, said chief executive Hari Menon.

"We realised that about 20-30% of groceries are unplanned and immediate-need purchases, and cannot wait for the next day or even the next few hours," said Co-founder Abhinay Choudhary. BigBasket, which raised more than 300 crore in the past eight months, is in a hurry to strengthen its leadership position as other electronic stores, too, are putting up shelves online for household supplies and groceries, emerging as a key category in online retailing.

Amazon recently announced it would launch an express delivery platform in partnership with mom-and-pop stores under a scheme called 'Kirana Now'. Rival online grocers Grofers, backed by Tiger Global, and Springboard-funded Local Banya also offer express delivery.

"Delivering in such a short time is a very big opportunity to convert offline shoppers to come online," said Arvind Singhal, chairman of retail consultancy Technopak. "And since BigBasket is the category leader in the space, they will want to consolidate their position."