Ola, Uber flouting FDI rules, alleges radio taxi association

Priyanka Pani Mumbai | Updated on January 20, 2018 Published on June 06, 2016


In letter to ministry alleges that the two companies are influencing consumers directly and indirectly

Threatened by the growing dominance of taxi app companiesm Ola and Uber in India, the Association of Radio Taxis has written a letter to the top ministries highlighting the fact that these companies have been violating FDI guidelines of the online marketplace model.

Kunal Lalani, President, Association of Radio Taxis, on May 25 had written a letter to Finance Minister Arun Jaitley, Commerce Minister Nirmala Sitharaman, DIPP Secretary Ramesh Abhishek, RBI Governor Raghuram Rajan, and Enforcement Directorate Director Karnal Singh, in this regard.

In the letter, Lalani has said Ola and Uber were influencing consumers directly as well as indirectly.

Ola and Uber were violating the recently issued FDI guidelines of a marketplace model that prohibits companies with foreign investment from directly or indirectly influencing consumers by giving out cash discounts. 

However, even though the DIPP guidelines, which were issued in March this year, talk about pricing influence on consumers, it has mentioned that this is also applicable to marketplace models' relationship with their sellers or drivers.

The letter alleges that taxi aggregators are giving out financial inducements and incentives to taxi owners/ drivers, thus, indirectly influencing the price.

"This is in absolute contravention of the FDI guidelines," the letter reads.

Second, the letter alleges that the taxi aggregators, who are heavily funded by foreign investors, claim to be market places as they act as facilitators between customers and transportation providers, but they "covertly control and exercise ownership" on all terms of service offered on their respective platforms.

It further adds that these companies are incurring hundreds of crores of losses every month but are continuing with their discounting model with the intention of destroying a level playing field.

Bangalore-based Ola has got over $1.3 billion in investment from SoftBank, Tiger Global and DST Global, amongst others. Uber, a San Francisco-based company, has been disrupting the taxi market globally and has invested more than $1 billion since it entered the Indian market in 2014.

It is important to mention here that the Taxi Association, which has players such as Meru Cabs, Mega Cabs and Tab Cab, among others, has been losing out on business as drivers on its platform have been quitting to join Ola and Uber for the huge incentives being given by the latter.

According to experts, the monthly income of an Ola or Uber driver has increased from Rs 20,000 to Rs 80,000 per month in the past two years. In a few cases, it has gone up to Rs 1.5 lakh per month.

The entry of these players has created huge demand and supply in the taxi market, thus benefiting consumers.

Meanwhile, Ola and Uber have also entered into a legal fight with both alleging that the other was poaching its drivers and launching campaigns to disrupt each others' business. 

Published on June 06, 2016
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