India’s Regulatory Approach To Uber

The following is a guest post by Tariq Ahmad, a foreign law specialist who covers South Asian countries and Canada at the Law Library of Congress. Tariq has previously written for us on a number of issues, including the Library of Congress collection on Islamic Law in Pakistan, sedition law in India, and physician-assisted suicide in Canada.  Tariq’s post today follows a similar recent piece by Jenny, Legal Challenges for Uber in the European Union and in Germany.

Just as many jurisdictions around the world are trying to keep regulatory pace with advances in mobile technology and the emergence of a “sharing economy,” state and municipal governments in India are struggling to regulate Uber and other mobile-based aggregating companies. A primary point of contention between some of these companies and government regulators is their legal status and whether they should be treated as traditional taxi-operating companies or as “intermediary” information technology companies. Aggregators like Uber contend that they do not own or lease any vehicles, employ any drivers, but rather see themselves as only providing a mobile platform for customers to connect with drivers. Most state and local jurisdictions in India are either modifying existing taxi regulations or introducing new ones. In most cases, Uber has considered these rules to be onerous, outdated, and incompatible with its business model.

Over the last few years, disputes have arisen on a series of issues involving licensing, safety, the environment, and surge pricing.

Legal Framework

In India, road transport is included in the State List of the Seventh Schedule of the Indian Constitution, “thereby placing road transport primarily in the [legislative] domain of State administration.” The Motor Vehicles Act, 1988, a central law that regulates road transport vehicles, requires specific permits for transport vehicles, and stipulates various conditions and requirements for holding such permits. In addition, the Act grants state authorities the power to issue rules regulating taxis. In exercising this power, state governments have established radio taxi systems, which regulate the operation of traditional radio taxis. The Information Technology Act, 2000, on the other hand, provides the legal framework for IT companies, including rules regulating e-commerce and cybercrime.

India does not currently appear to have a national law specifically tailored to regulate digital aggregators such as Uber; however, attempts to develop one are underway. In mid-October 2015, the country’s Ministry of Road Transport and Highways issued nonbinding guidelines for states to regulate companies such as Uber and Ola, which identify themselves as “on-demand information technology-based transportation aggregators.” In addition, draft legislation, the Road Transport and Safety Bill, 2015, which is still in its consultation stage, contains provisions regulating IT-based transportation aggregators, including a statutory definition of such entities.

Ban in Delhi Related to Safety and Licensing

The regulatory challenges faced by Uber over the last few years appears to have started in the National Capital Territory of Delhi, the capital of India. On December 8, 2014, the Delhi government imposed a general ban on all app-based taxi services, including Uber, after a 26-year-old female passenger was allegedly raped by her driver. S. Roy Biswas, Delhi’s deputy commissioner of transport, is reported to have stated that “[a]ll other transport/taxi service providers through web-based technology, who are not recognised, are prohibited from providing such services… till they get licence/permission from the transport department.”

At the end of December 2014, the Delhi government modified its existing radio taxi licensing rules to allow app-based taxis aggregators to be eligible for a radio taxi license and issued the relevant requirements that have to be fulfilled. Under the modified taxi system:

• licensees, including app-based taxi aggregators like Uber, must abide by all relevant statutes, including the Motor Vehicles Act, 1988, and the Information Technology Act, 2000;
• a license will only be granted to a company that is registered under the Companies Act, 1956, and “mandated to provide public transport services”;
• a driver must have a clean criminal record and be of “good moral character”;
• radio taxi licensees will be “responsible for the quality of drivers, their police verification, and their conduct with passengers”;
• licensees must have a registered office in Delhi, details of which (telephone number and email) need to be submitted to the Transport Department;
• licensed companies must establish and maintain a call center or a web portal;
• licensees will be required to maintain a minimum fleet of 200 taxis; and
• taxis must be fitted with a panic button so that, in case of any distress, a signal will be transmitted to a control center of the licensee and then to the nearest police station. A GPS or GPRS system must also be maintained in order to keep constant communication with a “central control unit of the radio taxi service during the entire time it is on hire.”

Uber took issue with many of these rules because it sees itself as a technology company rather than a traditional radio taxi service. According to one report, an Uber spokesperson stated that “[w]e are not a radio taxi company, therefore the Transport Department’s amendments to the radio taxi scheme do not help us serve our riders and drivers in Delhi” and “[i]t also does not accurately reflect the primary role that the Information Act 2000 plays in regulating intermediaries like Uber.”

The company resumed operations in January after a short suspension of its operations, despite the ban still being in place. The Transport Department warned that it will impound vehicles if Uber drivers continue to operate without a license.

 

Court Challenges

On December 23, 2014, relief from the general ban in Delhi was granted by the Delhi High Court to a few aggregate taxi service companies on the basis that the ban order was passed “without affording the parties affected an opportunity of being heard.” However, the Court did not lift the ban on Uber’s operations. In any case, operations still appeared to be prohibited since Uber and other companies were continuing to have their license applications rejected. In June 2015, the Delhi government rejected the companies’ applications on the grounds that they had failed to file certain undertakings affirming that they were in compliance with the ban imposed on December 8 and other rules and regulations. 

On July 8, 2015, the Delhi High Court struck down an order rejecting an application for a license for Uber, which cleared the way for the company to operate in the capital city while it seeks a license from the Delhi Transport Department. The Court held that the objections raised by the government in the case were not the grounds upon which the license was denied. Moreover, the Court found that the legal basis for the order, namely, that the petitioners were not complying with the general ban, had been held to be “legally untenable” in a similar June 11 case (involving the rejection of a license for ride-sharing apps Ola and TaxiForSure). In the June 11 case, the Court found that since the general ban had already been set aside in the Delhi High Court’s decision of December 23, 2014, it cannot be a valid ground for the rejection of the application.

Generally, the Court reasoned that a total or blanket ban on the right to carry out any trade, business or profession should be imposed only in the “rarest of rare or in exceptional circumstances.” The Court stated that the state should allow “everyone to carry on trade, business or profession without any restriction. However, if that is not possible, then the same should be allowed subject to reasonable restrictions. It is settled law that restrictions must not be arbitrary or of excessive nature so as to go beyond the requirement and interest of the general public.” In August 2015, Uber’s application for a license was reportedly rejected again for not complying with the existing ban order and for not filing an “undertaking stating that they are following all laid-down rules.” However, a spokesperson for Uber stated at the time that the company had not received any official notification.

Situation in Other States

In the states of Karnataka and Maharashtra, similar situations are playing out.  The Karnataka state government has directed Uber and other app-based aggregators to stop operations until they are licensed under newly issued rules, Karnataka On-Demand Transportation Technology Aggregators Rules, 2016. The government has also started to impound taxis affiliated with Uber and other companies. Uber has described these rules as “regressive” and “practically impossible to comply with” and “not in line with our business model.” Uber is currently challenging the constitutionality of the rules in the High Court of Karnataka, which as of now has directed the government to stop impounding vehicles for non-compliance with the new rules.

While most state jurisdictions in India are trying to regulate Uber as a taxi operator, the police commissioner of a suburb of Kolkata, the capital of the Indian state of West Bengal, seems to be taking a different approach in a newly issued order, which recognizes an “on-demand transportation technology aggregator” as a technology company.

Surge Pricing

Karnataka, in southern India, was the first state to curb surge pricing, the practice of automatically increasing fare rates during a time of high demand. As one news report notes, this often means that “customers have to deal with fares that are several times the actual rate advertised by these companies. Uber and one of its competitors, Ola, in the past, have fought against any state-level regulation of surge pricing, insisting that they provide incentives for drivers to move into high-demand areas and ensure customers always have access to cars.” Moreover, they argue that since they don’t hire drivers or own the cabs, the same price caps applied to traditional taxi companies shouldn’t be applied to them.

The April 2016 rules introduced by the state government provide the government with the authority to set a price ceiling above which Uber cannot charge fares. According to section 9(2) of the Karnataka On-demand Transportation Technology Aggregators Rules 2016, “…the fare including any other charges, if any, shall not be higher than the fare fixed by the Government from time to time.” According to one report, the state government had made the decision to “ensure competitive fares between online and offline taxi players.”

On April 18, 2016, the government of Delhi announced a ban on surge pricing in the city of Delhi and threatened companies with permit cancellation and impounding of their vehicles. This ban was imposed during the “second phase of the city’s odd-even traffic restrictions, which had been a test to reduce congestion by limiting the number of cars on the road.”

In response to the announcement, Uber and Ola temporarily suspended surge pricing in Delhi, but Uber reintroduced it soon after. However, at the end of May, Uber announced its decision to restrict surge pricing to government-prescribed rate ceilings.

At the end of April it was reported that a cap on surge pricing is also being considered by the Maharashtra State government.

Environmental Issues

In an effort to improve the quality of air in the city of Delhi, on December 16, 2015, the Supreme Court of India ordered that all taxis (including aggregators like Uber and Ola) operating in the National Capital Region of Delhi move from diesel to CNG fuel in the hope that “it will contribute substantially to the reduction of the pollution.” The Court gave taxi operators until March 1, 2016, to comply. At the request of cab operators and their respective associations, the Court extended the deadline twice, but made it clear that it will grant no further requests for extensions.

Though both major aggregators, Uber and Ola, appear to favor a planned phase-out of diesel taxi cabs over an immediate ban, they have, nevertheless, agreed to comply with the order, and are attempting to assist their drivers with initiatives to make the switch. The ban has caused taxi drivers to protest and reportedly has had a disruptive impact on the livelihood of thousands of private cab operators, including those associated with aggregating companies. Taxi drivers are pleading to the Court for leniency, arguing that they need for more time to make the switch. Many drivers are already paying installments on the loans they owe for their diesel vehicles and the costs that are involved in switching to CNG are significant. According to reports, on May 9, 2016, the Supreme Court decided to allow diesel taxis with national permits to operate in Delhi “until their permit expired but banned new registrations of such vehicles that provide pick-up and drop facilities in the Capital.”