Uber, Ola approved to charge 20% commission on fares in India

According to recently issued guidelines, India will allow app-based taxi aggregators such as Uber Technologies and Ola to charge up to 20 percent commission on ride fares, diluting an earlier proposal to cap fees at 10 percent.

Industry analysts had cautioned that a 10 percent cap would hit revenue and operations of the ride-hailing services like Uber, which have faced increased regulatory scrutiny in several countries.

The final guidelines, which is yet to be considered by state governments when granting licenses to aggregators, say that drivers should receive 80 percent of the trip fare with the remaining 20 percent going to the taxi companies.

The new regulations come at a time when ride-hailing businesses have seen revenue drop as travelers turn to personal vehicles to ensure safety and social distancing to minimize the risk of getting infected with COVID-19. In addition, many organizations continue to mandate remote working rules, affecting taxi demand.

The government guidelines suggested that at busy times, so-called surge prices can be a maximum of 1.5 times the base fare and that employers must provide drivers with insurance cover and limit them to working no more than 12 hours a day.

The new rules also enable aggregators to offer private car pooling services, but with a daily limit of four intra-city rides and two weekly inter-city rides. The ministry stated in the 23-page document that this was done to fulfill the “goal of reducing traffic congestion and automobiles pollution and effective resource utilization.”

While businesses such as Uber and Ola have long advocated permitting the use of private cars for ride-hailing, the government has been wary due to safety concerns. The move could also be met with opposition from existing drivers who are already struggling with low shared transport demand.

India accounts for an estimated 11 percent of US-based Uber’s global rides annually and is SoftBank-backed Ola’s home market.