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The new Motor Vehicle Aggregator guidelines which entail increased compliance costs, caps on commission fee and surge fee can impact the earnings and profitability of both drivers and aggregators, said experts.
The Motor Vehicle Aggregator Guidelines 2020 was issued by the Ministry of Road Transport & Highways on November 27, 2020.
‘Fatal impact’
“The current version of the guidelines overlooks business rationale as well as practicality and if adopted by States may be detrimental for aggregation models for cabs, buses and non-commercial vehicles,” Rameesh Kailasam, CEO, IndiaTech.org, a think-tank for Indian start-ups, told BusinessLine. Uber, Ola and Meru Cabs did not respond to queries.
“Incremental investments requirement for compliance as well as cap on commission fee will have a near to medium term impact on profitability and cash flows of cab aggregators. Post Covid-19 lockdown, drivers’ income has come under severe pressure Many drivers were earlier clocking over 12 hours on road which is restricted under new norms,” said Ashish Modani, Vice President, ICRA Ltd.
Nevertheless, the clarity regarding commission sharing should improve transparency between drivers and aggregators, he added.
Under the new guidelines, the surge fee, which acts as an incentive for drivers to be available during peak hours - has been capped at 1.5 times the base fare. “The surge fee cap is likely to dampen the overall earnings for both driver/operators thereby impacting the attractiveness of cab aggregator business in the near term,” said Ajay Srinivasan, Director, CRISIL Research. Similarly, aggregator profitability is likely to see some impact as income from ride cancellation is set to decline, he added.
The commission charged by the aggregator to the driver has been capped at 20 per cent, against 25 per cent earlier.
Drivers’ grouse
Shaik Salauddin, the national-general secretary of the Indian Federation of App-Based Transport Workers said “We would appeal to the government to re-evaluate commission for cab aggregators and lower it further as the drivers are suffering from not only the pandemic but also from rising fuel prices and high handedness of the insurance agents threatening to repossess our vehicles.”
“We were expecting the commission charged to be capped at 10 per cent as aggregators are just the brokers or mediators, that too through using technology,” Tanveer Pasha, President, Uber, TaxiForSure and Ola Drivers And Owners Association, said.
In terms of pros, the guidelines grant recognition to all forms of motor vehicles under the Act and this will grant the much needed recognition to bike taxis, car-pooling etc, said Kailasam.
These new guidelines also come at a time when the cab aggregator business has been grappling amid the challenges of the Covid-19 pandemic. “The taxi segment, including both the ride-hailing and traditional segments, has been tremendously hit by the pandemic. The new guidelines suggest some stringent filtering processes for driver selection, training and working hours. It could enhance the service quality and overall safety, but implementing the guidelines on the ground will be a challenge,” said Suraj Ghosh, Principal Analyst - Powertrain Forecasts, IHS Markit
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