India: What Is Holding Back Bike Taxi Services In India?

1. Evolution of policy governing bike taxi services

Commentators are optimistic about India's market for bike taxi services¹. Uncertain and differing regulatory approaches at the State level have, however, constrained its growth. Despite this, established players like UberMoto, the bike hailing service launched by Uber, have forayed into this segment, citing the "immense potential for bike sharing services in smaller towns where bikes are commonplace"² and "the "possibilities for creating flexible entrepreneurship opportunities".³ The Niti Aayog in its report recently proposed expanding the definition of shared mobility to include bike sharing while recognizing the many benefits of such shared mobility- by increasing occupancy of vehicles, a reduction in vehicle kilometer demand by nearly 35% accounting to 2000 billion kilometers in 2035.⁴

A brief background on the key regulatory changes since the inception of the policies governing the bike sharing industry has been set out below.

• November 5, 2004: Central Government allows motor cycles to be categorized as a transport vehicle under the MV Act.
• December, 2016: The report of the Committee constituted by the Ministry of Road Transport and Highways (MORTH) proposes bike sharing taxi policy guidelines to promote urban mobility. It recommends that State transport departments allow two-wheeler taxi permits as a last mile connectivity solution for citizens. It further recommends usage of private bikes for these purposes and an online option to allow private bikes to convert to taxis.⁵
• September, 2018: NITI Aayog's report on shared mobility refers to bike/cycle sharing as a low-cost option for first and last mile connectivity and lists a number of models, mainly docked, dockless and peer-to-peer basis bike sharing.⁶
• December, 2018: The MORTH tells the Lok Sabha, "...the States may issue permits for taxi under section 72 and 73 [of the motor vehicles act, 1988]. Therefore, it is legal for the States to issue taxi permits for all kinds of vehicles including two wheelers."⁷
• August, 2019: The Motor Vehicles (Amendment) Act, 2019 brings app-based mobility solution providers (such as Ola and Uber) under the ambit of the Motor Vehicles, Act 1988 (MV Act) through the amendment of Section 93 of the MV Act.⁸

2. Current regulatory position

The Motor Vehicles Act, 1988 (MV Act) is the primary legislation basis which various States have permitted and passed orders to allow bike taxi operations within their jurisdiction. Under Section 41 of the MV Act, the Central Government on 5 November, 2004 (2004 Notification) allowed the registration of motor-cycles as "Transport Vehicles", to be used for hire to carry one passenger on pillion.⁹

Acting on the 2004 Notification, the States of Rajasthan, Mizoram, Uttar Pradesh, Haryana, West Bengal and Goa and Union Territory of Chandigarh have from time to time, and subject to various conditions, permitted motor-cycles to be used as taxis in the form of "contract carriages".¹⁰

Some other States have explicitly banned use of two wheelers as taxis. Madhya Pradesh recently locked down the offices of an operator and seized its vehicles. Karnataka cites passenger safety, women safety and lack of policy on the subject as reasons for placing a ban,¹¹ but has held consultations with market players¹² after declaring them illegal.¹³

Tamil Nadu has seen some flip flop.¹⁴ The Madras High Court banned the operations of the bike taxi startup Rapido in July, 2019 on account of lack of regulations.¹⁵ The high court later put a stay on the ban in August, 2019.¹⁶ It was reported recently that the State of Tamil Nadu would soon legalize bike taxis.¹⁷

In Delhi, Rapido has launched its bike taxi services in Delhi, despite a lack of clarity on regulations.¹⁸ The company seems to have done this in wake of the odd-even scheme announced by the State Government. Reportedly, even Uber sent a proposal to the State Government to allow it to conduct its bike taxi operations in the city ahead of the odd-even scheme.¹⁹

Even in States that do have a clear policy for the operation of bike taxis, bureaucratic and practical hurdles exist – for example, the process of converting a private vehicle to commercial use (white to yellow number plate) is not always straightforward and the expense of doing so is burdensome for bike owners who wish to participate in the bike taxi economy. This needs to be fixed. The UT of Chandigarh, for example, directs the relevant authorities to convert private bikes to commercial bikes within 15 days of the submission of an application.

Many States are yet to notify any policy on the subject. This creates uncertainty putting aggregators in a quandary. This is one of the main challenges that startups in the business have faced.²⁰ Some shut the business (TuWheelz, Headlyt)²¹ while others pivoted to alternate models (Baxi Fresh)²². Bounce and ONN Bikes have forayed into the alternative business model of bike rental, which is governed by a separate, less onerous, regulatory framework – The UT of Delhi and the State of Himachal Pradesh, among others, have had regulations since 1997.

A last big nation-wide development for the industry was the 2017 Supreme Court judgement of Mukund Dewangan that permitted personal driving license holders to drive light commercial vehicles (which includes bikes) without the need of a commercial license.²³ For bike taxi aggregators this results in a faster driver on-boarding process.

3. Conclusion

The absence of a comprehensive policy; uncertain and differing regulatory approaches at the State level; and lack of infrastructure for supporting dockless, docked and peer-to-peer models for bike sharing make it tough for these business models to transition into success on a nation-wide basis. We hope for progressive states to adopt forward-looking policies. In our opinion, doing away with regulatory requirement for private bike taxis to be converted to commercial vehicles would be a welcome move – resulting in better utilization of idle private assets, employment opportunities and ease of mobility.

Authored by Rishwin Jethi, Associate with inputs from Ishita Shome, Principal Associate, and Anirudh Rastogi, Managing Partner at Ikigai Law.

Footnotes

[1] See Entrepreneur, Why the Bike Taxi industry is Here to Stay, January 16, 2019, available at: https://www.entrepreneur.com/article/326400

[2] See Inc42 Uber to Launch its Bike Service UberMoto in Amritsar and Kanpur, January 25, 2018, available at:
https://inc42.com/buzz/uber-launch-bike-ubermoto/

[3] Supra at 2.

[4] See NITI Aayog's report on shared mobility in India, page 10, 7-8 September, 2018, available at: https://niti.gov.in/writereaddata/files/document_publication/Shared-mobility.pdf

[5] See the report of the committee constituted by the Ministry of Road Transport and Highways to review issues relating to taxi permits, page 22, 15 December 2016, available at: https://smartnet.niua.org/sites/default/files/resources/Taxi%20Policy%20Guidelines.pdf

[6] See Supra Note 3.

[7] See Economic Times, Taxi permits to two-wheelers by States legal: Govt, 13 December 2018, available at: https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/taxi-permits-to-two-wheelers-by-States-legal-govt/articleshow/67076261.cms?from=mdr

[8] See Section 2 of the Motor Vehicles (Amendment) Act, 2019, 9 August 2019, available at: http://egazette.nic.in/WriteReadData/2019/210413.pdf

[9] "Transport Vehicle" as defined under Section 2(47) of the MV Act means and includes "public service vehicles" among other types of vehicles and "public service vehicle" is further defined under Section 2 (35) of the MV Act to mean and include contract carriages.

[10] "Contract carriages" are "a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract whether expressed or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein..." under Section 2(7) of the MV Act. Powers to grant specific contract carriage permits are allowed to the states under Section 66 of the MV Act.

[11] See Medianama, No Bike Taxis in Bangalore: Karnataka Transport Department to Ola and Rapido, February 18, 2019, available at https://www.medianama.com/2019/02/223-bike-taxis-illegal-bangalore-2/

[12] See Mint, Karnataka fines Ola ₹15 lakh, 3 days after revoking license, 26 March 2019, available at: https://www.livemint.com/companies/start-ups/karnataka-fines-ola-rs-15-lakh-3-days-after-revoking-licence-1553548938501.html

[13] See Inc42, Here Comes A Shocker For Ola And Uber's Bike Taxi Services, 5 March 2016, available at: https://inc42.com/flash-feed/here-comes-a-shocker-for-ola-and-ubers-bike-taxi-services/

[14] See Times of India, Madras high court stays order banning bike taxis in Tamil Nadu, 2 August, 2019, available at: https://timesofindia.indiatimes.com/city/chennai/madras-hc-stays-order-banning-bike-taxis-in-state/articleshow/70488419.cms

[15] See YourStory, Madras High Court bans bike taxi startup Rapido in Tamil Nadu, 19 July, 2019, available at: https://yourstory.com/2019/07/bike-taxi-startup-rapido-ban-tamil-nadu

[16] See YourStory, Rapido resumes service in Tamil Nadu as Madras High Court stays earlier ban order, 2 August, 2019, available at: https://yourstory.com/2019/08/bike-taxi-startup-rapido-tamil-nadu-as-madras-hig

[17] See The New Indian Express, Bike taxis will soon become legal in Tamil Nadu, 3 October, 2019, available at: https://www.newindianexpress.com/states/tamil-nadu/2019/oct/03/bike-taxis-will-soon-become-legal-in-tamil-nadu-2042608.html

[18] See Inc42, Rapido Finally Makes Entry Into Delhi Despite Govt's Dissent For Years, 30 October, 2019, available at: https://inc42.com/buzz/rapido-finally-makes-entry-into-delhi-despite-govts-dissent-for-years/

[19] See YourStory, Uber offers to run bike-taxis during the odd-even scheme in Delhi, 10 October, 2019, available at: https://yourstory.com/2019/10/uber-bike-taxis-delhi-odd-even-traffic

[20] See YourStory, Bike taxi startups think out of the box to succeed in a tough regulatory environment, but for how long?, 5 August 2019, available at: https://yourstory.com/2019/08/bike-taxi-startups-regulatory-hurdles-operating-environment-workarounds

[21] See Quartz India, The two-wheeler rules Indian streets, but bike-taxi startups are struggling to succeed, 2 January 2019, available at: https://qz.com/india/1480764/uber-ola-struggle-to-do-a-gojek-with-bike-taxis-in-india/

[22] See YourStory, From a bike-hailing service to a hyperlocal delivery startup: the Baxi Fresh journey, 8 July 2019, available at: https://yourstory.com/2019/07/startup-funding-bike-hailing-service-baxi-fresh-hyperlocal-delivery

[23] See Mukund Dewangan vs. Oriental Insurance Company Limited, Civil Appeal 5826/2011.

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