Over the past few months, Karnataka has become infamous for its treatment of taxi aggregator apps. It began with the state transport department banning Ola for operating bike taxis.

Last week, the department ordered aggregators to stop shared-cab services too in the city. In the absence of a predictable public transport system, many of these services – shared cabs or bike taxis – had become cost-effective alternatives for Bengalureans.

But despite their obvious benefits, state government continues to view such services with suspicion, and brings down the law on them. It is not that state government is particular about hindering easier transportation in the city. Rather, its actions result from a combination of factors – the law not catching up with technology, government’s lack of power to solve such issues, and having to manage the expectations of multiple stakeholders like cab drivers’ unions and BMTC.

Old Act leads to new problems

The Motor Vehicles Act was enacted by parliament in 1988, primarily to standardise licensing norms, prevent accidents and ensure effective compensation for accident victims. Encouraging shared transport or solutions to reduce congestion was not the original purpose of the law.

Traffic congestion has become a critical urban concern over the past decade, and many innovations have come up to ease it. However, despite many amendments proposed to the Act since 1988, none of these have viewed urban congestion with the seriousness it deserved or introduced any reforms to tackle it.

The subject of motor vehicles is constitutionally divided between the central and state governments. Centre has the powers to determine the broad parameters and principles for regulating motor vehicles, under the Motor Vehicles Act. Whereas states can frame Rules that determine how to implement the Act, and also tax vehicles under an independent state law.

In India, the broad principles determined by the central government recognises two categories of vehicles, based on their purpose. First, transport vehicles that are driven for commercial purposes. Second, non-transport vehicles that are driven for non-commercial, that is, private purposes. Both these categories of vehicles have separate licensing procedures.

Under the principles, a non-transport vehicle cannot be used for transport purposes. The central government’s intent here was clear demarcation of the two categories of vehicles, and the subsequent ease in identifying them on the roads. Separate rules apply for the two vehicle categories on taxation and accident compensation.

Carpooling violates the Act

The above-mentioned principle has been troubling carpooling apps that connect a private car owner with prospective passengers along the same route. While passengers get a comfortable ride, the car owner gets a small payment or redeemable points, often just enough to cover the cost of the ride. Carpooling apps such as Quick Ride and sRide are widely used by IT employees in Bengaluru. But they operate without the sanction of the law that requires clear demarcation of transport and non-transport vehicles.

Globally, carpooling apps have been in trouble for similar reasons. Countries such as Germany, France and Belgium have banned such apps since they operate commercially on licences meant for private use.

Uber too was launched in India as a carpooling app – it connected a private car owner to other passengers. But the company soon switched its business model to that of a taxi aggregator, to comply with the law. However, shared-cab services offered by Uber and Ola are illegal too.

Shared-cab services are also illegal

As carpooling by private car owners is illegal, aggregators have tried to work around the law by offering pooling/sharing services on commercial taxis. It does seem to be an innovative idea to circumvent the law, and to improve the efficiency of a ride.

But principles of the central Motor Vehicles Act disallow ride-sharing in cabs too. The Act does not allow commercial vehicles to pick up multiple passengers at different stops along a single route. To understand this, it may be worth exploring how the Act treats private transport vis-à-vis public transport.

Throughout the Act, public transport gets preferential treatment. This is fair, as pushing more people onto the public transport system would mean less traffic congestion and more efficiency.

But the intent of the Act seems otherwise – public transport systems in India are largely run by government agencies, and many provisions in the Act protect these agencies from external competition. Public transport operators enjoy monopoly on their operations, and are allowed to undertake multiple stops on a single route.

Hence, in line with the principle of preferential treatment for public transport operators, shared-taxi services unfortunately irk the law.

Newer forms of shared transport

Since the law does not allow sharing services in either private cars or cabs, aggregators like Ola then began offering shared services on bikes, the next most popular mode of transport in developing economies.

Bike taxi apps like Rapido became popular in Bengaluru recently. Pic: LinkedIn

The central Motor Vehicles Act does not apply the transport/non-transport distinction to bikes, but neither does it specifically allow the commercial operation of bikes. Since there are no guiding principles from the Act on this aspect, it is up to the state to determine whether bike taxis can be allowed as per its Rules. In this case, some states have chosen to allow it and some others have not.

Are aggregators transport or technology companies?

While many options offered by taxi aggregators are either illegal or in the grey area, the larger question where the law continues to be of limited help, is whether we should treat aggregators as transport or technology companies. Many countries globally are trying to answer this question. The European Union treats them as transport companies.

If a company that plays an integral role in shaping urban transport is treated as a technology company, it can escape many obligations under the law. This would not be in the larger public interest. In India, treating taxi aggregators as technology companies would exempt them from fare regulation and licensing norms.

Some of these issues seem to have obvious fixes, but what is lost in all the noise is, who is responsible for these fixes. The broad principles determined by central government need changes, and hence it is the centre which needs to initiate these.

The Motor Vehicles Amendment Bill, 2017, allows state government to take legal measures to encourage shared transport; it also includes broad principles to regulate aggregators. But the Bill is yet to see the light of the day.

Since the centre is responsible for many of the fixes, it is unfair that the state government – as in the case of Karnataka – faces criticism for sticking to the principles of law. A case may be made for softer law enforcement on taxi aggregators, wherein authorities allow carpooling and ridesharing without penalising them. But with softer enforcement comes discretion to authorities, and rent-seeking and newer problems may emerge.

What’s the future?

So, what is the way forward for these complexities in urban transport? Simple fixes to these problems, as proposed in the new Motor Vehicles Bill, may be a short-term solution, but definitely not a long-term one. As in the past, there will be newer forms of transport in future that will challenge the status quo. And the shortcomings of the law may disallow their introduction too.

Technology and transport is likely to see greater synergy, and there will be complex questions around what regulations are appropriate. To address some of these concerns, setting up a framework for a regulatory sandbox may be the way forward. Regulatory sandbox is an approach that allows time-bound testing of innovations under a regulator’s oversight.

It will allow new technologies to operate in a limited space, and based on its success, change regulations that will impact its broader introduction. For instance, if driverless cars were tomorrow introduced in India, the current regulation would not permit it. But in a regulatory sandbox environment, such cars could be tested for success in a specific area without worry of the law. If data indicates its success, regulations can be suitably amended.

But until this is done, we are likely to see more pushback from states in its treatment of taxi aggregators. Also, the debate is now shifting towards ensuring minimum income for drivers working for taxi aggregators, which is a sensitive subject for another article.