Cab aggregators (Aggregators) in India are currently facing a battle on three fronts. First, is with the drivers who are heavily unionised, and as a result have significant influence. Their grievance primarily relates to a lack of transparency in the fares, lack of margin, and liquidity issues. Second, is with the customers who are disgruntled with the lack of customer service caused due to unwarranted cancellation, safety concerns and poor maintenance of vehicles. Third, are the authorities (often the state traffic police) who are unable to reconcile the Aggregator model with the existing motor vehicle laws.
In order to resolve these issues satisfactorily, the Ministry of Road Transport and Highways of the Government of India issued the model Motor Vehicles Aggregator Guidelines on 26 November 2020 (Model Legislation). The Model Legislation is intended to act as a guiding framework for the state governments to frame laws applicable to Aggregators in their respective states. The Model Legislation primarily stipulates pre-conditions for granting licenses to Aggregators and also regulates the Aggregators' functioning. While certain state governments have started adopting the Model Legislation by framing laws based on the same (such as the On Demand Transportation Technologies Aggregators Guidelines, 2022 (Bengal Guidelines) issued by the Department of Transport of the State of West Bengal on 3 March 2022), some states have released draft legislation on the basis of the Model Legislation (such as the draft Delhi Motor Vehicle Aggregators Scheme, 2022 (Delhi Guidelines) issued by the Department of Transport of the National Capital Territory of Delhi on July 5 2022) for public comments. We will discuss the manner in which the Bengal Guidelines were enacted and implemented, to understand how the situation may unfold for the Aggregators when the other states enact similar laws.
Where lies the problem?
Onerous compliance mechanism – Some of the onerous compliance requirements under the Model Legislation include conducting a three-step training program for each driver, procuring health insurance and term insurance for each driver, storing and sharing data with each state government (as and when requested), establishing a 24x7 control room, and others. To make matters even more complicated, the onus of ensuring that the vehicles used are compliant with applicable local laws has been imposed on the Aggregators. The Delhi Guidelines also require that the Aggregators to transition to an all-electric vehicles by 1 April 2030 and a failure to comply will entail imposition of heavy penalty on the Aggregators.
Different states will require different compliance framework - The Model Legislation gives certain leeway to each state government to further legislate when framing their laws. With multiple states enacting their own version of the Model Legislation, the Aggregators will be required to have different compliance requirements for every state they ply within. They may even be required to modify the user interface of the apps for each state. For example, the Model Legislation states that the app and the control room will have to be available in English and Hindi, whereas the Bengal Guidelines states that the app and the control room will have to be available in English, Hindi and Bengali. There can be other challenges with this model, including where state governments may implement a wide scope of the Model Legislation. For example, under the Delhi Guidelines the definition of Aggregator covers within its meaning entities managing drivers for providing deliver/pick-up services for products, packages or parcels, whereas the definition of Aggregator under the Model Legislation covers only those entities that are managing drivers offering their vehicles for transportation of passengers.
Legislation on the same subject matter by different states also disregards the fact that vehicles ply between two or more state on a regular basis (such as cabs plying between Delhi, Noida and Gurugram). If these territories impose contradictory obligations on the Aggregators, it will become exceedingly difficult for the Aggregators to comply with all applicable state legislations at the same time.
Giving the drivers a permanent employee status – Most Aggregators engage drivers on a freelance basis, as opposed to engaging them as labour or as employees. This keeps the drivers outside the ambit of applicable employment and labour legislations in India, and consequently reduces the cost of operations and administration for the Aggregators significantly. However, some compliance requirements expected from the Aggregators under the Bengal Guidelines (with respect to the drivers) are such that, it gives the Aggregators a degree of administrative and financial control over the drivers (such as providing them health benefits, ensuring they adhere to a fixed number of working-hours, assessing their performance, initiating disciplinary action, bringing them within the ambit of sexual harassment at workplace legislation, etc.). This may render the relationship between the Aggregators and the drivers to be that of an employer-employee, and it may give rise to situations or claims or litigation where the drivers may claim a permanent employee status with the Aggregator. Courts in certain jurisdiction (such as the United Kingdom) have already taken a view that the relationship between the Aggregators and the drivers is that of an employer-employee, and compliance requirements under such legislation will only help in furthering the positions taken by the courts.
Data requests – The Model Legislation has created multiple avenues for requiring the Aggregators to procure, store and share data with the relevant state government, without defining what data is or explaining the nature of data that is required to be shared. An Aggregator receives multiple types of data from its drivers and customers (including but not limited to sensitive personal data and information such as credit card data, debit card data, payment interface data and passwords). While the Model Legislation states that such data will be shared by following due process of law, the Bengal Guidelines disregard the provision pertaining to adherence of due process of law and requires the Aggregators to share data as and when required by the Government of West Bengal. Similarly, the Bengal Guidelines require the Aggregator to localise all this data within West Bengal, whereas the Model Legislation merely requires localisation of the data within India. If each state government follows the West Bengal model and starts implementing similar provisions, then the Aggregators will be required to have a data centre in each state, thereby leading to significant increase in costs and potentially making the business unviable. Furthermore, the Bengal Guidelines require the Aggregators to obtain the prior consent of the customers before their data is shared, but does not require the Aggregators to obtain the prior consent of the drivers before sharing their data with the state government, thereby undermining the privacy and data protection rights of the drivers.
Redundant provisions – The Bengal Guidelines states that if a driver cancels due to medical reasons or vehicle breakdown, he shall not be allotted any rides for the next 6 (six) hours. It disregards the fact that the legislation permits drivers to operate with multiple Aggregators. Therefore, even if a driver's profile is locked by one Aggregator, he can easily switch to the other Aggregator. Unless all the Aggregators have devised a mechanism whereby blocking the profile by one Aggregator will result in blocking the driver's profile with all the other Aggregators, this provision is redundant. Also, this may erode the driver's ability to work with the Aggregator they are more comfortable with, which may not be helpful either for the Aggregators or the driver.
While the Model Legislation, Delhi Guidelines and the Bengal Guidelines are not perfect and will require fine tuning, these legislations have made an honest attempt to regulate this domain and thereby resolve several issues faced by Aggregators, drivers, and the customers. A few progressive changes brought forth by these legislations include providing a statutory basis for the drivers so that they obtain a fair share of the rides that they are undertaking, imposing a fair cap on surge pricing, lowering the base fares, taking care of the safety of the passengers, maintaining a central depository of drivers and their records, etc. However, there is an overwhelming for uniformity of the legislations across the country, with dialogue with the relevant stakeholders and better solutions for all the parties concerned.
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