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Guidelines for cab aggregators: Licensing and Pricing controls !

The Ministry of Road Transport and Highways has issued Motor Vehicle Aggregators Guidelines, 2020 (“Guidelines”) to regulate the cab aggregator market. The Guidelines have been issued vide notification S.O. 4251(E), in pursuance of Section 36 of the Motor Vehicles (Amendment) Act, 2019, which provides for amendment of Section 93 of the Motor Vehicles Act, 1988. The Guidelines will serve as a guiding framework for State Governments. Therefore, state governments whenever issuing the license to any cab aggregator may allude to the Guidelines. The key aspects of the Guidelines are:

(i) Regulating the aggregator: It seeks to regulate the cab aggregator market and defines “aggregator” as a digital intermediary or market place for the passenger to connect with a driver for the purpose of the transportation. An aggregator should have a registered office in India as a company registered under Companies Act, or, a LLP, or a Co-operative Society and has to comply with Information Technology Act, 2000 and rules made thereunder such as Intermediary guidelines.

(ii) Licensing Requirements: The aggregator now, needs to apply for license in states, where it seeks to operate. A license issued by the state government will be a mandatory pre-requisite for permitting business operations by the aggregator. State governments will have to follow the guidelines issued by the Centre while issuing the license to an aggregator. The aggregator must commence its operations within 6 months from the date of grant of license, otherwise, the license stands cancelled. The validity of such license is valid only for 5 years, and the price of such license is fixed at INR 5,00,000, and renewal of such license will cost INR 2,500. In addition, the aggregator license can be suspended if there is “systemic failure” to ensure safety of the rider and the driver, violation of contractual obligations, repetitive instances of financial inconsistencies with regard to the fares charged to riders, unjustified surge pricing, severity of financial swindling, and violation of safety standards, among others.

(iii) Fare Regulation: The base fare of a trip would be on the basis of city tax fare as indexed in WPI and surge pricing has been capped at 1.5x of the base fare, while minimum price chargeable has been capped at 50% off of the base fare. The Guidelines have also capped the share of aggregator at 20%, while the driver of the vehicle must receive 80% of the total fare. The cancellation charge for the driver and the rider has also been capped at 10% of the total fare, as long as it not more than 100 INR. Surge pricing, which means the pricing applicable when the demand for cabs outnumbers the supply of cabs, in a particular area, at a particular point in time, cannot be charged unjustifiably. Aggregators will be allowed to charge a fare 50% lower than the base fare and a maximum surge pricing of 1.5 times the base fare.

(iv) While engaging a driver: After conducting a comprehensive background check of the driver along with a medical examination, the aggregator should have an Induction Training Programme for on-boarding drivers, to train the drivers on how to use the app, follow the relevant Motor Vehicle Laws, drive carefully, imparting first responder training, gender sensitization, and maintain hygiene in the cab etc. The aggregator also needs to insure their drivers with health and term insurance amounting to 5 and 10 Lakh Rupees respectively, with 5% increment each year. The Guidelines also make it mandatory for the driver to take a 10-hour break, and the driver cannot drive for more than 12 hours on a single day.

(v) Compliances for Aggregator: The aggregator should also ensure that the vehicle is in compliance with all the relevant motor vehicle laws, as well as insurance and emission norms. The aggregator should also set up a 24/7 control room to monitor cabs and a 24/7 call center with a valid telephone number, to assist the driver and rider, as well as for grievance redressal. The aggregator should also ensure women’s safety and protect their rights. Further, women who wish to car pool, they should be given an option to car pool with women only.

(vi) App related Requirements: The app of the aggregator must be in Hindi and English, as well as in official state language, where Hindi is not a state language. The app data should be stored on the server in India, for minimum a period of 3 months and maximum for a period of 24 months. This data would be accessible to the relevant government authorities, however, no customer data would be shared without the written consent of the customer.

(vii) Power of the Competent Authority: Empowered to take suo moto cognizance and suspend the license of the aggregator, if there is any wrongdoing at the end of the aggregator. If the number of suspensions in one financial year exceed 3, then that would lead to cancellation of license. Further, if the aggregator commits any gross offence, or has failed to receive its license and NOC pursuant to the suspension order, that would also lead to cancellation of order. As soon as the license is cancelled, the aggregator must suspend and stop all its operations. The aggregator, if it wishes, can voluntarily surrender the license as well. Lastly, if the aggregator wishes, it can appeal against the order passed by the authority within 30 days of such order being passed, to the State Government or any authority notified by the State Government. The state government under the Guidelines is empowered to investigate the drivers, who have been off boarded more than once. Further, the State Government can call for any information, it deems necessary from the aggregator, for compliance under the Guidelines. The authorities are also empowered to conduct search and investigation at the aggregator’s premises under the Guidelines.

Authored by
Neeraj Dubey, Partner and Vibham Raman, Associate