Despite the Prime Minister putting a great deal of energy into promoting a startup campaign with the tagline ‘we unobstacle’, the winds of change do not seem to have circulated down to India’s startup capital.

In yet another instance of rapidly-evolving technologies being obstructed by stagnant laws, ZipGo, a Bengaluru-based startup that provides minibus and van hailing services, has been forced to suspend operations in the city. Transport Department officials raided ZipGo’s offices and seized vehicles in an effort to get the company to desist what they see as a violation of the State government’s monopoly over bus transport.

Bengaluru has one of the worst traffic problems in the country, with narrow roads choking on an ever-increasing number of vehicles. With one vehicle for every two people, the city supports a larger fleet of vehicles relative to its population than Mumbai and Delhi. And that fleet expands by more than 10 per cent every year. The city’s public bus transport monopoly, the Bengaluru Metropolitan Transport Corporation, serves over 5o lakh people a day with slightly more than 6,000 buses.

“Private motor vehicles, that is, cars and motorcycles, are the real threat to government-run public transport, not privately run public transport. Whether it be the humble share-autos or nifty tech-enabled transit services, these private enterprises reduce congestion and improve mobility,” says Shreya Gadepalli, Regional Director of the Institute for Transport and Development Policy.

ZipGo operates an app that provides a convenient middle ground between a private car and an overcrowded BMTC bus, offering air-conditioned transport with guaranteed seating along a fixed route. “The idea is to enable people to go from point A to B in the most comfortable and economical way possible,” says Jitender Sharma, CEO of ZipGo. “The people who are using ZipGo are people who own cars and bikes and they’re leaving them at home and using our service.”

The company, which opened shop in August last year and served 5,000 people a day on average, operates as an aggregator of vehicles, similar to ride-hailing apps like Uber and Ola — both of which have faced their share of regulatory troubles. The bone of contention in this case lies in the interpretation of the Motor Vehicles Act, with the Transport Department insisting on classifying ZipGo as a stage carrier — which involves providing street pick-ups and drop-offs — while the company says it is a contract carrier as all its passengers make a reservation in advance through the app. While stage carriage is an exclusive monopoly of the BMTC, contract carriage is open to private players. Sharma is hopeful that, as in the case of the taxi companies, dialogue will resolve the impasse. “If they are a contract carrier their vehicles should go from point A to Z. Instead, they stop at B, C, D and E along the way thanks to bookings from the app. This means they are a stage carrier,” said Narendra Holkar, Joint Commissioner for Transport of Bengaluru Urban and Rural.

The Road Transport and Safety Bill, a draft law that cuts through the confusion by doing away with the distinction between stage and contract carriage has been awaiting parliamentary approval since 2014.

Delhi welcomes ZipGo also operates in New Delhi, where regulators have been much more accommodating due to the pressures placed on the transport system. “The Delhi government is more progressive on this, because it has been dealing with the issue [of traffic and air pollution] for the last 20 years,” says Sharma. “Delhi has more vehicles than Mumbai, Chennai and Kolkata combined. But the rate of growth of vehicle population is the same in Bengaluru as in Delhi today. And it is one-third the size of Delhi.”

Holkar, however dismisses the potential benefits of the service with respect to reducing congestion and pollution, insisting that it is illegal and cannot be allowed to operate. If the aim is to protect the BMTC’s bottomline, shutting down one startup is unlikely to improve the balance sheets of a corporation that hasn’t seen profits in five years.

And these losses are perfectly acceptable according to Gadepalli. “Public transportation is not a business. It’s a service to improve urban mobility, while consuming very little road space, fuel and money per person,” she said, adding that public and private transport operators can co-exist as long as adequate safety regulations are put in place. “It is ironic that public agencies, rather that curbing the use of cars and motorcycles, use arcane regulations to put the brakes on private sector initiatives to improve public transport.”