Uber Tries To Justify Surge Pricing To Indian Public

Uber lobbies against the ban imposed by Karnataka government on surge pricing

Uber is personally extending its reach to each user in the Silicon Valley of India, Bengalaru, to elaborate upon how surge pricing is beneficial for them. Surge pricing – defined as increase in prices when demand is higher – is viewed as anti-consumer act because it lets the company take advantage of times when many people simultaneously want to avail rides.

On April 6 2016, the South Indian state government of Karnataka imposed a ban on the practice. Bengaluru is Karnataka’s capital and an important market for ridesharing apps, such as Ola and Uber.

The government of Karnataka said cab service providers in the state cannot charge over 29 cents per km for offering rides in an air-conditioned cab and 22 cents for a non- conditioned one.

This regulation could hit Ola and Uber, which frequently charge 2 to 4 times more for offering a ride because of surge pricing. In personal emails to each user in the city, Uber said it has had a look at the figures and “the government’s proposal to fix prices will cost more overall.”

A calculation sent to Itika Sharma Punit at Quartz revealed that she would have spent an amount of money 30% greater for availing the service since January this year if the new law had been followed. The company didn’t elaborate upon the mathematics explaining this calculation. An email sent by Quartz wasn’t immediately responded.

Surge pricing is not new in the country. It is used actively in other industries like aviation. The state government intervened to check unusual rises in airfares but did not impose a ban on the practice.

Some experts hold the belief that the new policy of Karnataka government on Uber technologies pricing is misdirected. Some experts have asked questions regarding how transporters like Uber and Ola determine surge pricing. Doubts like those are fuelled by reports given by riders who say cabs charged “peak hour charges” to them for offering rides during non-busy hours.

The decision by the American transporter to lobby against the regulation of the government is understood as the legislation might be replicated in the rest of the Indian states.

According to Business Standard, Maharashtra government is already thinking to impose a similar ban. Economic Times revealed recently that Travis Kalanick’s organization and the Indian cab company have lowered down the base fare for taxi rides by approximately 20 to 30% to battle with auto-rickshaws. To deal with higher levels of demand, they even increase fares by five times.