Price Is The Real Boss In Ride-Hailing | The Reason Why

There are genuine problems with ride-hailing in India. Unfortunately, the government has got both the diagnosis and the treatment wrong. These platforms handle millions of decisions every day.

A cab reaching your pickup point at a reasonable price isn’t about who owns the platform—it’s about coordination.

And in the real world, only prices can make that coordination work efficiently. New Delhi is now set to get a new taxi app, Bharat Taxi, a government-backed cooperative ride-hailing service.

The idea sounds appealing: drivers own the platform, governance is democratic, and incomes are meant to be fairer. But the real question is simple: will changing ownership fix a coordination problem?

Think about a copper mine shutting down in the Congo. Nobody issues global orders, yet copper prices rise everywhere. Electricians switch to aluminium, recycling picks up, other mines increase output, and people start using copper more carefully. All that adjustment happens because of one signal: price.

Ride-hailing works the same way, just much faster. Rain, traffic, late nights, or big events push up demand. Surge pricing is a signal to drivers that their time is now more valuable, compelling them to get on the road.

As more drivers come on the road, the prices drop too – again a signal to the drivers that they can relax for a moment. This constant price movement keeps the system balanced.

Yes, nobody enjoys surge pricing. But without that feature, you end up like a traditional taxi, where no one wants to come to Andheri (a busy area in Mumbai). Cities that tried banning or capping surge pricing saw fewer cars and longer waiting times.

Many media outlets have called this the AMUL moment for ride-hailing. It sounds nice, but the comparison falls apart pretty quickly. Milk is a stable product. Supply doesn’t change every few minutes, prices are set periodically, and logistics can be planned well in advance.

Ride-hailing is the exact opposite. What works for dairy doesn’t automatically work for urban mobility. The key question is simple: Will a cooperative ensure enough drivers are available when people actually need rides?

If one app shows fixed fares while another offers higher earnings during peak hours, most rational drivers will choose the latter. The global experience shows the same thing, highlighting that the ownership may change, but price signals still decide where the driver goes.

But there’s more than pricing in India. India has a shortage of cabs, and the reason is regulatory. Uber India’s leadership has acknowledged this problem. India requires commercial vehicle registration for ride-hailing. However, anyone can onboard on Uber and other apps in countries like the US, UK, and Australia. This difference matters enormously.

Imagine you have some free time and want to earn a few bucks more while riding your own vehicle. Can you do that in India? Well, not through such apps. India needs commercial registration, which raises entry costs. This is why India experiences chronic shortages even when fares rise.

Ironically, the market had already found a fix through car-pooling platforms like S-Ride, along with options like Uber Share and Ola Share. I used them regularly before Covid. They helped curb congestion, fuel use, and emissions. Instead of encouraging such ideas, several states shut these models down.

This wouldn’t hurt as much if public transport were robust. As public transport failed again and again, the demand spilt back onto roads, worsening what I’ve earlier called ‘negative roads’ in one of the earlier pieces.

Then, every state has different rules, mostly hostile to aggregators. Governments often bend to taxi unions, protecting legacy systems at the cost of consumers, innovation, and the environment.

Price is the real coordinator in this business. When governments try to replace it with committees, caps, or good intentions, the system becomes slower and more centralised, worsening the consumer experience. So what should regulation focus on instead?

-        Not micromanaging prices.

-        Lower entry barriers by allowing private vehicles into ride-hailing.

-        Make algorithms more transparent so drivers clearly understand earnings—and frankly, fares should be split and transferred to drivers instantly.

-        Focus regulation on basics that matter: safety standards, vehicle quality, grievance redressal, data transparency, and portable social security for drivers.

-        If the government really wants to step in, it could build an ONDC- or UPI-like open platform, where common rules apply but aggregators compete on service and pricing.

I hope Bharat Taxi proves me wrong. If it delivers reliable availability, short wait times, and fair earnings without distorting price signals, that would be a real success. But history and basic economics suggest otherwise. Ownership may decide who gets more money, but prices decide whether a cab shows up at all.

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