Bengaluru tells Ola, Uber that surge pricing is illegal

Ola, India's largest taxi aggregator, has landed in a spot of bother over its fare structure. Its office in Bengaluru was visited by officials from the transport department for inspection following complaints from users that it was resorting to surge pricing during peak hours. The transport department declared that surge pricing is illegal and has served a notice to Ola. The company has agreed to stop the practice.

Surge pricing is used by cab aggregators to control the availability of for their cars during increased demand. The transport department allows them to charge a higher fare only during night hours. They are not allowed to increase prices during peak or off-peak hours.

Additionally, Ola has been charging all customers the same fares irrespective of the type of permit under which a taxi is operating. Drivers can hold various licenses to operate vehicles - some that allow travel state-wide, across Karnataka, and others that limit travel to Bangalore. The fare structure is specified by the government and can vary based on the permit. Ola will now have to comply with a fare schedule, specified by the government.

The practice of surge pricing was introduced by Uber, since it started operations in India. The move has now come in for criticism.

Source: WSJ, Economic Times