If India is [a] computer, Rahul Gandhi said in April 2013, the Congress is its default programme. The party may or not be the default programme but the ideology that it has thrust upon the nation, socialism, is indeed the software, and that too embedded software. For whichever party may reign, it is socialism that rules. So, tightly regulating wealth creators remains the default setting. The government’s desire to impose a ceiling on the commission earned on rides by cab-aggregators such as Uber and Ola is a recent example of the software making its ugly presence felt.
The wise men and women in Lutyens’ Delhi are planning a 10% cap on commission of the total fare. This cap may figure in the norms for ride-hailing companies that may be in stipulated as early as by this year-end.
Former US President Ronald Reagan famously said, “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it.” This surely appears to be the Narendra Modi government’s view. Nothing else explains this perverse desire to cap the earnings of cab-aggregators.
To begin with, there is scarcely any demand from any quarters that ride-hailing companies are fleecing commuters. Such a demand in itself is irrational in a free economy, but we leave this issue aside. The fact is that nobody is complaining about high rates charged by these companies.
Quite the contrary, city commute has become much more convenient and safer, especially for women. There are also reports about people reducing the use of personal cars because of the convenience and affordability of hailing cabs.
Yet, in an unprecedented move, the government wants to lower the commission earned by such firms, which at present is in the region of 20%. “We are planning to release the draft [aggregator rules] for public feedback sometime next week. It will largely be in line with the guidelines that were shared, with a few small changes,” a Road Transport and Highways Ministry official told a business newspaper.
Significantly, the Ministry is headed by Nitin Gadkari. After playing a key role in killing growth in the auto sector, he wants to do an encore in the business of cab aggregation.
The government is within its rights to ensure stricter safety checks for drivers, so it’s okay if it limits working hours; the proposed limit is reported to be 12 working hours a day. But price control in this business, as in any other, would be not only obnoxious but may also be deleterious for it. Reuters quoted Joy Bandekar, a former executive at Ola, as saying that it would not survive at a lower rate of commission: “The 10% [commission] is not viable, it has to be something around 20%.”
The ride-hailing companies flourished because they were not burdened with price control. Founded by Bhavish Aggarwal, an IITian, and backed by Softbank, the nine-year-old Ola was valued at $6.2 billion in May. It has not only competed fiercely with the slightly older multinational Uber in India but is giving the latter tough competition in the overseas markets. Simon Smith, managing director of Ola’s operations outside Europe, reportedly told the media the Indian company will be an “aggressive” competitor, charging keen prices to attract customers and lower commissions to lure drivers.
This is what Indian entrepreneurs can do when not restrained and constrained by politicians and bureaucrats. A young company has become strong enough to take on an American giant in the overseas market.
But, alas, our politicians and bureaucrats can’t stand that. Hence the proposed cap on commission.
Their homilies, however, are unending. For instance, this year’s Economic Survey had a full chapter called ‘Nourishing Dwarfs to become Giants: Reorienting policies for MSME Growth.’ It grandly announced, “Our policies must, therefore, focus on enabling MSMEs to grow by unshackling them.”
One of the foci was “on service sectors with high spillover effects such as tourism.” At the press conference releasing the document, the government’s economic advisers waxed eloquently about freeing micro, small and medium enterprises or MSMEs from red tape. The Survey said, “MSMEs that grow not only create greater profits for their promoters but also contribute to job creation and productivity in the economy… The chapter then lays out the policy map for re-orienting the policy stance to foster the growth of MSMEs and thereby greater job creation and productivity in the economy.”
Does unshackling businesses include price control? Is this how the government wants to help MSMEs in general and new companies in particular?
The issue here is not a homegrown company tormented by policy makers; the issue is the embedded software of socialism. And its practitioners in the system, who just can’t allow any economic activity to flourish. They are much worse than Reagan thought they are. Their philosophy is: if anything moves, tax it heavily. If it keeps moving, regulate it to death.
One only hopes that cab aggregators survive the assault on their autonomy.
Ravi Kapoor is a freelance journalist