Uber Supports Surge Pricing, Says It Increases Reliability

During peak hours, cab aggregators such as Ola and Uber charge two or three times the normal rate, making it unaffordable for many consumers. As a consumer-friendly measure, the Karnataka government has recently banned the surge pricing in Bengaluru as per provisions in the Motor Vehicles Act, 1988.

In response to the government’s ban, Uber’s President of India operations Amit Jain said that surge pricing makes Uber more reliable as it is matching supply with the demand.
 
“Dynamic pricing makes Uber reliable because Uber can vary prices to meet changes in demand. The magic of pushing a button and getting a ride happens because supply and demand adjust in response to price changes…without it the reliability of always having a ride when you need one becomes hard and takes away the whole Uber experience,” he said.

To resolve this issue, Uber is engaging with the government and explaining their point of view. “We have submitted our objections. Ultimately, regulations have to be progressive and pro-people. Surge pricing is matching supply with demand at a very local level. The airlines and hotels have been doing this for a long time now. This is not a new concept,” Jain told BW Businessworld.

In stark contrast to this, some others such as Magic Sewa cab services feels surge pricing does not make sense in India. Launched in the first week of February, Magic Sewa (which also accepts bookings online and through phone) is one of the latest entrants to the app-based cab aggregator space.

“Surge pricing is an import from places like North America and Europe where dynamic pricing is used to meet the high demand in events like a football match or a festival by pushing more private car owners to come out,” said Rakesh Aggarwal, founder of Magic Sewa. “In India, private cars can’t be used by the cab aggregators and the commercial vehicles are on the road anyway, so the concept of surge pricing is not relevant here.”

Aggarwal said that many cab aggregators today use surge pricing as a “loss recovery mechanism” where they make up for the losses incurred by their low rate schemes during normal hours.

Ola declined to comment on the issue of surge pricing.