<p><em>It is high time that the Competition Commission of India took cognisance of the predatory pricing taxi aggregators indulge in, weighing taxi aggregators and taxi operators through the same scale, </em><strong>says Kunal Lalani</strong><br><br>With billion-dollar valuations and the financial muscle of global VCs, taxi aggregators have been waging price wars to win over customers in India. Low taxi fares are attractive for sure, but are they favourable in the longer run, or are they just a short-term trap to woo customers and monopolise the market?<br><br>With the taxi business in India growing at a healthy rate of 20-25 per cent every year, the organized taxi sector alone, which accounts for just 4-5 per cent of the taxi industry in India, is expected to grow to $7 billion by 2020. For a share of the pie, there has been a surge in the emergence of new players in the market. Backed by global venture capitalist funds, the new players operateas taxi aggregators who act as a conduitfor connecting consumers with taxis through technology such as mobile apps. Ola, Uber and TaxiforSure are a few companies that operate as taxi aggregators. With the breakneck speed with which they are expanding their business, their modus operandi begs to be analysed.<br><br>The purported revenue model of taxi aggregators is such that they donot employ the taxi drivers or own a fleet of cars, but earn a commission in the range of 10-20% of the journey's fare a cab hailer hands out to the taxi driver. Let us analyse their revenue model a bit further. Compared to normal taxi fares, the prices quotedby taxi aggregators are abysmally low, for example, Rs 8 per kilometre. Considering that most of the aggregator taxis run on diesel-which is a violation of the Supreme Court's order fornot using non-clean fuel for plying in the city-the fuel cost alone turns out to be Rs 4-5 per kilometre, based on current diesel prices, which when added to the overheads of the car's purchase value, maintenance and insurance costs, amounts to a lot more than Rs 10 per kilometre. If you further subtract the commission of the aggregators, the taxi driver is left with nothing and has to pay from his own pocket with such fares.And that is the reason why taxi aggregators supplement taxi drivers' earnings in the form of a bonus or incentive, which exceeds Rs 15 per kilometre and clearly leads to a huge hole in the aggregators'pockets.Surviving on VC funds, most taxi aggregators are incurring huge losses for every trip executed, which makes clear that the intent of their pricing strategy is not to earn profits in the short-term but to establish market presence by luring customers through low fares.<br> </p><table align="center" border="1" cellpadding="1" cellspacing="1" style="width: 600px;"><tbody><tr><td><img alt="" src="http://bw-image.s3.amazonaws.com/taxi-pricing-lrg.jpg" style="width: 606px; height: 368px;"></td></tr><tr><td><em>The above chart has a sample price (in INR) a typical taxi aggregator charges per kilometre, which is simply not sustainable in the long-run as the actual expenses incurred are almost double!</em></td></tr></tbody></table><p><br>One may ask, so what is the taxi aggregators' long-term strategy for making profits? Market monopolisation, is the answer. Through abysmally low taxi fares, normal radio taxi cabs and other neighbourhood taxi operators will be unable to match the pricing for long, slowly fizzling outof the market. The aggregators will then establish a monopoly and will have the freedom to charge unreasonably high prices, perhaps even form cartels, and exploit consumers-taking them for a ride! There is no free lunch in business. Once customers get used to these services, the aggregators will be free to charge as much as three to four times the fare to recover the losses.<br><br>But what about fare price regulations by the government and the transport authority? Unfortunately, taxi aggregators masquerade as technology companies, which is grossly misleading, and go scot free of the regulations governing regular taxi operators.The technology quotient of taxi aggregators is a misnomer since radio taxi cabs were the first ones to adopt hi-fi technology-employing radio networks, GPS-enabled tracking, and bookings through not just the telephone but also websites and mobile apps. Bymasquerading as technology companies operating from different jurisdictions, much like e-commerce companies, taxi aggregators avoid paying service tax, too.<br><br>It is evident that the taxi aggregators indulge in unregulated, unfair practices ofpredatory pricing, which some might object to as an insinuation. However, per the competition law, predatory pricing can be proved by establishing the dominance of the market player, and the dominant position of taxi aggregators-in both revenue and market share-can easily be proven by looking at their cash reserves and phenomenal rate of market expansion. For example, Ola Cabs already has 60,000 cabs in 52 Indian cities-with 34 cities that were added in the past three months alone-and intends to expand to 200 cities by the end of 2015. Ola is able to expand because of its deep VC-funded coffers-with multiple rounds of funding, Ola is sitting on rich cash reserves and a valuation of more than $1 billion.<br><br>It is high time that the Competition Commission of India took cognisance of the predatory pricing taxi aggregators indulge in, weighing taxi aggregators and taxi operators through the same scale. The means of enablement hardly matters as long as they are in the business of providing the same service-that of taxis. Hence the call for reasonable fares thatpromote fair competition and benefit the consumers in the long run.<br><br><em>The author is chairman association of Radio Taxi India</em></p>
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