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Karnataka government suspends Ola’s licence for 6 months

The Karnataka government has suspended the licence of Ola Cabs (ANI Technologies Pvt. Ltd) for six months with immediate effect, alleging that the ride-hailing company had been running two- wheeler taxis in violation of the law.

“There is a violation of rules as bike taxis are not part of the licence issued to them (Ola),” said an official at the state transport department, requesting not to be named.

The notice to cease operations comes against the backdrop of new-age technology companies in Bengaluru, home to one of the biggest start-up ecosystems in the world, protesting against what they say are archaic government rules.

The state transport authority took up the matter after receiving complaints and a subsequent report by the regional transport authorities, the official said.

“Under the licence, only app-based taxi services were permitted and there was no permission for bike taxis,” the transport department said in its notice to Ola on 18 March.

Ola and Uber, the two main ride-hailing companies, were issued licences in 2016 under the ‘Karnataka On-Demand Transportation Technology Aggregators Rules 2016’, which were formulated after prolonged legal battles.

Both Ola and Uber had run into trouble with the transport department when it they began offering two-wheeler taxi services in 2016. The state government proposed to formulate rules facilitating bike taxis in Bengaluru, but there was little progress despite the interest shown by the industry. Uber was also forced to shut its two-wheeler taxi offering in 2016 after the department started to seize its vehicles.

“We have been closely working with the authorities on this topic, responding to queries and making proactive representations to the ministry. Despite other companies continuing to operate illegally, Ola halted its bike-taxi experiment weeks ago, instead seeking the state’s cooperation to develop a legal framework for a pilot that will continue to take advantage of emerging opportunities in the mobility economy,” Ola said on Friday.

“This notification is unfortunate and we look forward to an opportunity to address these concerns directly with state officials to find a solution for our driver-partners and millions of Ola users in Karnataka,” the company said.

The transport department said that the response by Ola to its initial notices were not satisfactory.

The crackdown on Ola is likely to impact Ola’s business in its home city and largest market, Bengaluru, besides thousands of drivers on the platform, said industry analysts.

Cab-hailing services provide about two million rides every day across India, of which 70-80% are in the top seven cities, including Bengaluru, according to industry estimates. The cab-hailing market has been witnessing a slowdown, with growth down to 20-30% year-on-year from a staggering 100% a few years ago, said several analysts Mint spoke with.

“This suspension impacts the drivers and Ola’s business in the short run, but I am positive that Ola would be able to resolve this with the authorities and may not see a six-month suspension,” said an analyst tracking the space, requesting anonymity. “The cab-hailing market has been experiencing a slowdown in growth because of a lack of supply (of cabs) due to which customers have been moving away to bike rental services,” the analyst said.

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