THE proliferation of taxi-hailing services through apps, thanks to the surge in the number of smartphones, is transforming the urban commuting scenario in India.

Though governments have spent billions of rupees in building metro rail networks in several cities in a bid to discourage commuters from taking their cars to work, it has failed in its objectives because of lack of connectivity from metro stations to homes or offices.

But the huge popularity of taxi-hailing apps is increasingly resulting in thousands of office-goers leaving their cars behind at their homes in metros including Mumbai, Bengaluru, Delhi, besides scores of cities and towns in India. Many upper middle-class Indians, especially executives in multinationals, domestic corporates and in various professions avoid travelling by public transport because of the abysmal failure of local authorities to provide efficient and comfortable service.

Consequently, many end up driving their cars to work, adding to congestion and pollution on the roads. But the emergence of taxi-hailing services by the likes of Uber and domestic giants such as Ola has done wonders to the commuting business.

The traditional taxi and auto-rickshaw services in Indian cities, dominated by unions affiliated to political parties, is appalling. Many taxis and auto-rickshaws refuse to ply on routes that the commuter wants to go on. During peak hours it is impossible to catch a taxi or a three-wheeler; the few that agree to carry passengers indulge in cheating.

Uncouth drivers, dirty vehicles, lack of air-conditioning and opaque fares have over the years discouraged office-goers from depending on taxis or auto-rickshaws. But the taxi and auto-rickshaw hailing apps have come as a boon for commuters in several cities. The vehicles are air-conditioned and in good shape, there are value-additions by way of free wi-fi service and newspapers in the taxis and the drivers do not argue with the passengers.

Of course, the taxi-hailing sector, and especially American major Uber, started off on a disastrous note, when one of the Uber drivers raped a woman passenger in Gurgaon near Delhi last December. Last week, a special fast-track court in Delhi found the driver guilty of rape.

There were a few other instances involving Uber drivers in the national capital region over the past few months, when the drivers were accused of misbehaving with women passengers. But the crackdown on these services — when many cities and states banned them temporarily — has resulted in their beefing up security and other related measures.

Earlier this month, the Indian government published guidelines for web-based ride-hailing firms following months of legal battles and bans imposed by some state governments. The union road transport ministry had asked companies like Uber and Ola to get permits from local authorities.

One of the key measures to ensure safety of women passengers is that all vehicles should be equipped with emergency safety buttons. Taxi-hailing apps now feature emergency buttons, which can alert the police and the company’s call centre in case of an emergency.

Uber, which has faced a lot of flak for its earlier anti-consumer practices, has now fallen in line. Amit Jain, its India president, welcomed the new guidelines. The San Francisco-headquartered company — whose investors include Microsoft, Google and Amazon — is also looking at the possibility of getting a licence in India.

Recently, the Delhi high court provided relief to Uber and Ola, allowing them to continue to operate their services till March 1; they will have to then give an undertaking about phasing out diesel-based vehicles. All other taxi operators in the national capital have converted to compressed natural gas (CNG) vehicles.

BOTH Uber and Ola — backed by deep-pocketed investors — are aggressively expanding their presence across India, offering hefty discounts to consumers and massive incentives to drivers. Indeed, many analysts note that the companies are bleeding heavily and are unlikely to make profits for the next few years.

While Uber plans to invest $1bn to raise its share in India (which is the second-largest market for it after the US), Ola — which dominates the business — has also been raising funds. Last month, Didi Kuaidi, a Chinese taxi-hailing app, and the biggest rival to Uber in China, invested an undisclosed amount in Ola. Didi Kuaidi is backed by Alibaba and Tencent. The Chinese firm has also invested in GrabTaxi of Singapore and in Lyft, Uber’s biggest rival in the US.

Ola recently raised about $225m as part of a new round of funding, aimed to draw nearly $0.5bn in new investments. ANI Technologies, the Mumbai-based company that owns Ola, has already raised about $900m in capital. Its major investors include Japan’s SoftBank Corp; American hedge fund Falcon Edge Capital; New York-based PE fund, Tiger Global Management; Singapore’s GIC; Russian billionaire Yuri Milner’s DST Global; and former chairman of India’s Tata group, Ratan Tata.

Though Uber entered the Indian market about two years ago, it has been overtaken by Ola, the domestic start-up. While Uber has a presence in 25 cities in India, Ola is present in more than 100. By the end of 2015, Ola plans to operate in 200 cities. It also has a network of 325,000 vehicles, more than double that of Uber.

According to Bhavish Aggarwal, co-founder and CEO, Ola, the company has more than 25m unique customers and has served over 150m bookings on its app so far. “We are focused on our mission of building mobility for a billion people and our current rate of 1m booking requests a day puts us on track towards this mission,” said Aggarwal. During peak hours, it has 7,500 users hailing its cabs every minute.

Aggarwal hopes to raise customer bookings from 1m daily at present to 3m by April next year. Unlike Uber, Ola has also roped in auto-rickshaws in a few cities. Earlier, Uber had insisted that its customers pay through a wallet or by credit/debit cards, but it has for the first time revised its global model and now its drivers accept cash in India.

Published in Dawn, Business & Finance weekly, October 26th , 2015

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