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Less Regulations for a Better Commute- a Case Study on Taxi Aggregators in Kerala 1

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Less Regulations for a Better Commute- a Case Study on Taxi Aggregators in Kerala 1 Abstract In the age of app-based cabs operated on advanced technology platforms, traditional taxi services lag behind due to regulations by state and central governments in a changing market scenario. This report studies the Indian context of taxi regulations and laws with special reference to Kerala. It deals with the history of regulations and its impact on the sector in the contemporary Less Regulations for a context. Better Commute A Case Study on Taxi Aggregators in Kerala Abhishek Das Pooja Koppa May 2018 Centre for Public Policy Research Centre for Public Policy Research Less Regulations for a Better Commute- A Case Study on Taxi Aggregators in Kerala 1 Acknowledgment Centre for Public Policy Research (CPPR) team is thankful to all those who contributed towards developing the ideas in the report. This study was conducted under the guidance of Dr D Dhanuraj (Chairman, CPPR). The authors specifically thank Janaki Nair (Research Intern, CPPR), Sherylene Shamina Rafeeque (Consultant Editor, CPPR) and friends of CPPR for their contributions to developing this report into its final form. We are thankful to the Atlas Economic Research Foundation, USA, for supporting the research project. Centre for Public Policy Research www.cppr.in Less Regulations for a Better Commute- A Case Study on Taxi Aggregators in Kerala 2 EXECUTIVE SUMMARY Taxi businesses faced a major threat from online taxi aggregator companies in the recent past. Though different state governments follow varying policies towards taxi aggregators, they largely go by the Indian Motor Vehicles Act of 1988. In some countries, the federal government has given the local government the authority to regulate taxi services-with variations in the chain of command depending on the system of government. The appearance of cutting edge advances and changing economic situations require a reassessment of the state control of taxicabs. This paper particularly looks at the Indian context of taxi regulation and the laws with special reference to Kerala. The objective of this research paper is to examine the regulatory barriers in taxi services which was until recently availed by the upper middle class and social elites. It studies the reasons for treating taxis as a public good from the perspective of Indian Motor Vehicle Act. The study looks into the various regulatory policies applicable to taxi regulations in India- quantity regulation, quality regulation, price aspect and market conduct regulation. The quality aspect poses a direct barrier to the entry of players into the market, which is governed by a central act-Motor Vehicles Act of 1939. The act serves as an advisory to states in regulating motor transport. As per the act, vehicles can be registered as stage carriage, contract carriage, goods carriage and private service vehicle. Quality regulation includes specifying standards relating to the vehicle, the driver and the operator to ensure safety and quality of taxi services. Motor Vehicles Act enables State Transport Authorities (STA)/Road Transport Authority (RTA) to prescribe conditions on issuance of taxi permits, number of passengers, maximum weight carried, etc. The MVA of 1988 allows the state government to fix maximum and minimum fares for all contract carriages. In Kerala, fare regulation is applicable for all contract carriages having an engine capacity less than 1500cc. Market conduct regulation aims at maintaining market order and preventing competition in the industry. The local taxi, radio taxi and cab aggregator‟s regulations differ in terms of ownership, mode of access, fares and services of operation. As a case study, the author looks into the policy framework related to Kerala and how it evolved. Taxi regulation in India emerged from the Hackney Carriage Regulation passed in 1913. Motor cabs regulation started from 1940s through taxi permits and then gradually evolved over years. The government is motivated by the desire to serve the public by ensuring quality control and preventing undesirable market outcomes. However, the Centre for Public Policy Research www.cppr.in Less Regulations for a Better Commute- A Case Study on Taxi Aggregators in Kerala 3 Kerala government did not make it mandatory to exhibit fares in taxis till 1962 due to memorandums. The government was a mediator between trade unions and the public in fare regulation. Since the government started fixing the fare, it was obligated to ensure profit for the industry. The cab aggregators are able to charge less for the same ride as compared to government regulated taxis, which proved that there could be market driven systems that are outliers to the regulatory framework of government. Regulation has led to stagnation in the quality of taxi services whereas the non- regulated market ensured competition which forced operators to improve their services. Last mile connectivity was also an issue as the existing (regulated) taxis were inaccessible, which was a major reason for people to shift to private vehicles in the past. The study concludes that the century old regulations existing in the taxi industry failed to assure the optimal performance of the sector. Stakeholders need to lift regulations and reach out to other sectors to attain full potential. Government policy must enable innovation and restrict monopoly in the market. Centre for Public Policy Research www.cppr.in Less Regulations for a Better Commute- A Case Study on Taxi Aggregators in Kerala 4 Introduction Governments across the globe are grappling with how best to integrate taxis into the public transport infrastructure. Taxi businesses in various countries thrive in a considerably regulated environment with the state exercising control over its operations. The sector has been in the public eye with numerous cities witnessing clashes between traditional taxi services and newer players in the market such as app-based cab aggregators. These technology companies like Ola, Uber etc. have been recognized as Transportation Network Companies (TNCs) as they connect passengers and taxi drivers through an online platform. A few Indian cities like Mumbai and Kochi have witnessed violent altercations between local taxi drivers and drivers working with TNCs. Many of these incidents are rooted in the fact that newer business models in the taxi industry are functioning outside the existing legal and regulatory framework. More often than not, the contretemps are based on fare offered by the aggregators which is lower than the fare fixed by the government as well as the territorial authority of taxis. In most countries, the central government has given the authority to regulate taxi services to the local government with variations in the chain of command depending on the system of government followed by the country. The regulatory mechanisms followed around the world are largely similar and are categorised based on the aspect of taxi operation covered. Recent years have seen a rise in worldwide demand of taxi unions to restructure the regulatory systems that govern taxi services. The advent of advanced technologies and changing market conditions call for a re-evaluation of the state regulation of taxis. This paper tries to trace the origin of regulation of taxis by the state, how the regulatory regime has worked over the years, its impact on the taxi sector and the relevance of those regulations imposed by the government on the taxi industry today. The paper particularly looks at the Indian context of taxi regulation and laws with special reference to Kerala. However, the findings of the study are applicable to the economies across the world where the taxi industry is highly regulated and the prevalent regulation does not address the novel business models that are emerging in the sector. Origin of taxi regulations in the world The history of taxi regulation in the world can be traced back to the 17th century, when England tried to control the rapidly increasing for hire hackney coaches in London. In 1636, Charles I, concerned by the congestion in London city, issued a proclamation to restrict the number of hackney coaches to 50 and prevent them from carrying passengers less than three milesi. On 23rd June 1654, an ordinance was passed for the regulation of Centre for Public Policy Research www.cppr.in Less Regulations for a Better Commute- A Case Study on Taxi Aggregators in Kerala 5 Hackney Coachmen in London and adjacent places limiting the total number of hackney coachmen and hackney coaches in London to 200 and 300 respectivelyii. Every person admitted to keep a hackney coach had to pay an admission fee of 40 shillings per carriageiii. The first hackney carriage licenses were issued in London in 1662 to do away with fights over fares and undesirable coachmen who were likely to pose a risk to their passengersiv. When the number of coaches was regulated, the authorised carriages began to have higher demand resulting in increase in hire charges. Hence the authorities introduced fare regulation to prevent the coachmen from charging exorbitant fares. The London Hackney Carriage Act of 1831 which repealed the previous statutes on taxis was a comprehensive legislation for regulating taxis in the Metropolisv. Taxi regulation in the rest of the UK was addressed by Section 37 to 68 of Town Police Clauses Act of 1847vi. This was followed by the Locomotive Acts of 1861, 1865 and 1878 which regulated the use of mechanically propelled vehicles in the UK. The Motor Car Act of 1903 in UK introduced motor vehicle registration and driver licensing. The Road traffic Act of 1930 repealed previous acts on cars and removed all speed limits on UK roads for motor cars. The speed limits were reintroduced by the Road Traffic Act of 1934 in the wake of an alarming number of accidents. The British Empire expanded in the 18th and 19th centuries, its technologies and laws were passed on to its colonies. Thus, the Hackney Carriage Act was passed in India as well in the year 1879 along the lines of London Hackney Carriage Act of 1831.
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