Delhi rape case: Banning taxi cos like Uber, Ola is just another way of passing the buck

BENGALURU/NEW DELHI: The government’s response to the alleged rape of a woman in an Uber cab has been dramatic, some would say typically ham-handed. Many, including at least one Cabinet minister, think the move to ban taxi aggregators doesn’t address the main issue -- safety of women, and not necessarily the legality or otherwise of such services.

The taxi business has been transformed over the past few years, starting with radio taxi operators such as Meru, Tab Cabs and Megacabs that began as fleet owners employing drivers. They then moved to a subscription fee system, where drivers need to pay a fixed amount each day. On the other hand, the aggregators work on a commission-based model.


Also Read: 5 reasons why banning taxi companies may not be a good idea

“Our response has always been to stop things. So, are we now saying that the state can no longer provide security, but private establishments are the ones that have to?” said Rehan yar Khan, managing partner of Orios Venture Partners, and an existing investor in aggregator Olacabs. “This is what happened in the eBay case many years ago. There was a new technology, which no one understood. Why are we passing on the buck to private establishments?” he said.

Cab drivers are keen on signing up with aggregators. “The drivers are happy with the new system as it is transparent and they get bookings based on their nearest location,” said Jaspal Singh, cofounder of Valoriser Consultants, which provides market research for transportation services. The Delhi government’s attempt to participate in the system did not succeed. “In the last seven years, just 14 companies have registered and of that eight have shut as they failed to induct 500 cabs,” Singh said.

According to the Delhi Transport Department, there are about 4,400 cars in the national capital, which experts say is too small a number to serve a 25 million population. The aggregators found a market ready to be tapped, with apps that made things much easier for users. “I rely on my Uber and Ola taxi apps to book cabs everyday--to work, parties, chores everything. They are much more convenient and cheaper than radio taxis,” said a user in Mumbai. A Delhi-based lawyer said that in terms of price, quality and customer service, the taxi-hailing apps have done a much better job than traditional radio taxi companies— newer cars, faster response times and easier payment methods.

The critical flaw was, of course, safety. “In theory, a company like Uber should be safer for the consumer than options like autos and regular taxis since you know the exact driver who will pick you up and their photo,” said Kartik Hosanagar, professor of ecommerce at The Wharton School of Business. Now that this has proven illusory, what could be the solution? Industry experts don’t make much of a ban, they say a stricter regulatory framework needs to be in place. That and better use of technology.

“Additional technologies such as dashboard cameras may be needed to instil security among passengers, especially women,” said Sunil Wattal, professor at Temple University, US. “The government, on its part, should mandate these measures for all cab operators.” Singh of Valoriser said entering a destination should be made mandatory.

“The system will capture the information to create a route plan. In case of any unauthorised deviation, the system should generate an alert, and the call centre executive should call the driver to check this deviation,” he said, adding that there should also be a feature for riders to share trip details with a trusted person for additional security, a feature that some aggregators and radio taxi services already offer.

Cab companies should also collaborate to build a database of blacklisted drivers. “It would create fear in the mind of drivers losing employment permanently if they indulge in any unlawful activities. It would also help companies to hire only good drivers,” said Singh. To be sure, the aggregators need to shoulder their share of the responsibility for the current situation. As innovators, they should have sought to make sure that the regulatory system was updated in lockstep. “They never tried to approach the government to recognise the service. They assumed that things will never go wrong and it is good to have no law. This approach was very incorrect,” said Singh.

This global strategy, which the company seemed to uphold as a virtue, is perhaps one reason why Uber is facing the ferocity of local administrations all over the world now. It can’t be denied that this also allowed it to expand at a phenomenal rate, earning a valuation of as much as $40 billion. But now the company is facing court cases, investigations and bans in Germany, the Netherlands, the US, Brazil, Thailand, Canada and India.

Uber has said it will appeal against the ban imposed by the Delhi government. It has to--India has become its leading market outside North America. The country offers massive potential for online and mobile-based ride-hailing ventures and the market is currently valued by the industry at about $14 billion. There’s no doubt that the aggregators have met a badly felt need.

“Fundamentally we have been slow to modernize public taxis. Cab aggregators like Uber, Ola and TaxiForSure are disruptive in being able to enable a quantam leap in services that is available to public,” said Prahlad Tanwar, director of transport and logistics at KPMG.

With such apps opening up the market, technology enabled ride-sharing or car-pooling services are entering India. ZoomCar, which got Rs 48 crore from Sequoia Capital, allows users to rent cars by the hour or day. Another startup that entered the country is Rocket Internet-backed ride-sharing service Tripda, which allows passengers to car pool over long-distance.

“There is a lot of excitement around how technology apps can help in aggregation of freight or cargo. This has been a long-standing issue in India--of there not being a common platform or a fleet exchange,” said Tanwar. Some experts hope that once emotions settle down, the government takes a more considered view. “Hopefully, better sense will eventually prevail and they will take a more holistic look at the situation,” said a venture capital investor with a portfolio company in the space.