The advent of app-based aggregators in India, a field which is presently dominated by players such as Ola and Uber, has seen the need to come up with a framework that would govern and regulate such app-based aggregators; with the intent to promote passenger safety as well as ensure the welfare of drivers engaged by such app-based cab aggregators. This note outlines the key factors that govern the regime of app-based cab aggregators in India and the recent trends in this sector.
PRIMARY LEGISLATIONS GOVERNING APP-BASED CAB AGGREGATORS IN INDIA
The Motor Vehicles Act, 1988 (MV Act) is the primary legislation enacted by Parliament which governs and regulates vehicles and vehicular traffic in India. The term ‘aggregator’ was introduced by way of the Motor Vehicles (Amendment) Act, 2019 (2019 Amendment), which was necessitated owing to the increase in operations by app-based cab aggregators. An ‘aggregator’, as defined under the MV Act, is a digital intermediary or market place for a passenger to connect with a driver for the purpose of transportation.
In this regard, the 2019 Amendment to the MV Act states that no person shall engage himself as an aggregator, unless he has obtained a license from such authority and subject to such conditions as may be prescribed by the State Government. Further, whilst issuing the license to the aggregator, the State Government may follow such guidelines issued by the Central Government.
MOTOR VEHICLE AGGREGATORS GUIDELINES 2020 ISSUED BY THE UNION MINISTRY OF ROAD, TRANSPORT AND HIGHWAYS
In November 2020, the Union Ministry of Road Transport and Highways (MORTH) issued the Motor Vehicle Aggregators Guidelines 2020 (MORTH Guidelines) as a guiding framework for state governments to consider for issuance of licenses to transport aggregators and for the purposes of regulating the business conducted by such aggregators. The MORTH Guidelines would be applicable to aggregators on-boarding transport vehicles in the area of operation. Further, the vehicles that may be integrated by the aggregator shall include all motor vehicles under the MV Act as well as e-rickshaws.
Some of the salient features of the MORTH Guidelines, inter alia, include guidelines in relation to:
- arrangement of a driving test facility with a simulator to test the ability of the concerned driver;
- vehicles, such as valid registration and permits, insurance and fuel norms;
- the aggregator’s apps and websites, such as storage of data, details of the fare structure, establishing control centres, regulation of fares, surge pricing and cancellation of rides etc.; and
- safety, such as ensuring appropriate functioning of GPS, and conducting spot checks.
In addition, the aggregator must, inter alia, ensure compliance with the following provisions in relation to the drivers, such as:
- conducting background checks as well as make the drivers undergo a medical examination before being on-boarded;
- executing a valid service provider contract with the relevant driver in English and the language the driver understands, specifying the necessary terms and conditions applicable for on-boarding of vehicles and operating vehicles therein;
- providing health insurance for each driver integrated with the aggregator for an amount of at least INR 5,00,000 with the base year 2020-21, which shall increase 5% each year;
- providing term insurance to each driver integrated with the aggregator for an amount of at least INR 10,00,000 with the base year 2020-21, which shall increase 5% each year;
- ensuring that the driver is not logged in for an aggregate of 12 hours on a calendar day. Further, a mandatory break of 10 hours for the driver shall be imposed subsequent to a login that exceeds 12 hours; and
- developing a mechanism on the app to ensure that drivers engaged with more than one aggregator do not drive beyond a cumulative period of 12 hours either on their app or on another aggregator’s app.
The MORTH Guidelines state that the drivers would be entitled to receive 80% of the fare applicable on each ride, and the remaining charges shall be received by the aggregators. The state government may, by way of a notification, direct 2% over and above the fare towards the state exchequer for amenities and programmes related for aggregator operated vehicles.
In addition, as per the MORTH Guidelines, an aggregator would need to pay INR 5,00,000 to obtain a license and INR 2,500 each for renewal, issuance of a duplicate license or noting a change of address of the licensee (i.e., the aggregator).
Further, an aggregator would need to pay a security deposit of the following amounts if they meet the following threshold:
- If the aggregator has up to 100 buses or 1,000 other motor vehicles – INR 1,00,000; or
- If the aggregator has up to 1000 buses or 10,000 other motor vehicles – INR 2,50,000; or
- If the aggregator has more than 1000 buses or 10,000 other motor vehicles – INR 5,00,000.
AGGREGATOR GUIDELINES ISSUED BY STATES AND UNION TERRITORIES
The state of West Bengal has come out with guidelines to regulate the operational activities or conduct of ‘on demand transportation technologies aggregators’ (WB Aggregator Guidelines), which is in consonance with the MORTH Guidelines and which have come into force. As per the WB Aggregator Guidelines, the aggregator shall be required to obtain a license as well as adhere to compliances in relation to vehicles, drivers, regulation of fares, safety, etc. Further, whilst aggregators are permitted to charge a fare which may be up to 50% lower than the base fare, the maximum surge pricing cannot exceed 50% of the base fare. The WB Aggregator Guidelines, in addition, state that the owner/driver of the vehicle shall receive 80% of the fares applicable and the remaining fare shall be received by the aggregator. The WB Aggregator Guidelines further prescribe that no passenger would be charged for dead mileage (except when the distance for availing the ride is more than three kilometers) and the fare shall be charged only from the point of boarding to the point of alighting.
In 2016, the state had come out with the Karnataka On-demand Transportation Technology Aggregators Rules, 2016 (KA Aggregator Rules) which, inter alia, provides that an aggregator would need to obtain a license and comply with license conditions (which mandate background checks and refresher training for driver partners); fares and other charges are capped at the prevailing Government rates and no passenger would be charged for dead mileage.
Whilst the government of Delhi has formulated the draft Delhi Motor Vehicle Aggregator and Delivery Service Provider Scheme, 2023 (Draft Delhi Aggregator Scheme); the same is yet to be brought into force. The Draft Delhi Aggregator Scheme stipulates, inter alia, measures for enhancing passenger safety as well as provides for a phased conversion to electric mobility. Further, the aggregator would be required to ensure proper parking for all its vehicles in the NCR Region and shall switch to an all-electric fleet by 1 April 2030. The regulation of fares would be notified by the Department of Transport, Government of National Capital Territory of Delhi, from time to time.
In addition, the states / territories of Delhi, Haryana, Uttar Pradesh and Rajasthan, (which constitute the National Capital Region (NCR)) have signed the Combined Reciprocal Common Transport Agreement which contemplates formulating and harmonizing rules for motor vehicle aggregators for NCR in the spirit of the MORTH Guidelines; however, this has not been brought into force yet.
In April 2023, the government of Maharashtra constituted a committee to draft and formulate rules for aggregators within three months; however, till date no such rules have been framed. Further, as per the order of the Supreme Court in the matter of Uber India Systems Private Ltd. & Anr. v. Union of India & Ors., an aggregator is required to obtain a license under the MORTH Guidelines till the time the state government formulates and brings into force rules that would govern and regulate aggregators. However, in this matter, the Supreme Court also stated that the aggregators could make a representation to the concerned authorities, as far as complying with the requirements of the MORTH Guidelines are concerned. In Maharashtra, aggregators have been issued provisional licenses till the time they have been granted a formal license to operate.
TO BEAR IN MIND
States and territories across the country are in the process of drafting and adopting regulatory frameworks largely in line with the MORTH Guidelines; however, the same are yet to come into force across various locations. In addition, on the basis of the Supreme Court’s order in the matter of Uber India Systems Private Ltd. & Anr. v. Union of India & Ors., aggregators would need to apply for a license before the relevant transport authority to operate before the regulatory framework adopted by the concerned states come into force.
 For the purposes of this update, we have only included regulations and guidelines issued by West Bengal, Delhi, Maharashtra and Karnataka.
 SLP (C) No. 5705 of 2022