Ride-sharing apps hit hurdle as state sides with taxi operators

  • The recent seizure of motorbikes used by Tootle and Pathao riders  raises concerns about letting tech companies operate unregulated
- Tsering D Gurung, Kathmandu

Jan 16, 2019-

On Monday, the Metropolitan Traffic Police detained five motorcyclists in Kathmandu who were associated with ride-hailing apps and impounded their motorcycles. The bikers were fined Rs 1,000 each and then let go.

The crackdown continued further on Tuesday, as both Tootle and Pathao, two motorcycle ride-sharing companies in the Capital, reported more incidents of their riders being apprehended by traffic personnel. 

“The officers are requesting for rides and then nabbing our riders,” said Shashank Shumsher Thapa, assistant manager of Pathao, the Bangladeshi tech start-up which began its Nepal operations in September last year. “This is nothing but the government using scare tactics to shut down our business.”

But in an interview with the Post, senior officials at the Metropolitan Traffic Police Division said they are simply responding to public complaints against what the government deems as “illegal service providers.”

“We have received numerous complaints about the services provided by these companies,” said Jay Raj Sapkota, the spokesperson at the division. “Questions were also raised about whether or not they were operating legally. We consulted with our colleagues at the Department of Transport Management who informed us that none of these companies is duly registered and that their operation is completely illegal.”

The question surrounding the legality of ride-hailing apps such as Tootle and Pathao that provide bike-taxi services have long been a subject of controversy. 

On one hand, the government terms ride-sharing business “illegal”, citing a provision under the Department of Transport Management Act which bans use of private vehicles for transport services. 

On the other hand, the start-up companies decry the outdated law—it was written in 1993—and argue the government needs to amend laws in accordance with time.

“They are basing their arguments on archaic laws,” said Sixit Bhatta, co-founder of Tootle. 

“Instead of facilitating the growth of tech start-ups that address public needs and create employment opportunities, the government is stuck on a 23-year-old law that hasn’t been updated to reflect the change in society.”

Such conflicts between tech start-ups and authorities have taken place around the world whenever a ride-hailing app has been launched in the market. In most cases, these discussions have resulted in the government introducing new policies and regulations that set standards for a new industry. 

Both Tootle and Pathao function under a similar app-based transportation model. Anyone with a driving licence and ownership of a two-wheeler can sign up to be a “partner” in Tootle’s lingo or a “biker” in the case of Pathao. Once registered, these riders can accept requests from customers. The companies are paid a cut of the fare.

The popularity of the two apps has risen rapidly in recent years—both as an alternative to regular taxis for customers and as a source of income for their riders—in Kathmandu.

According to Tootle’s data, the company currently has 10,000 registered “partners” and the app has been downloaded 200,000 times. Likewise, Pathao, which launched in Nepal less than four months ago, says it currently has over 20,000 riders and 200,000 users.

“From students who are earning extra cash to pay for their education to former migrant workers for whom this is a main source of income, we have provided employment to a whole range of people,” said Bhatta. 

Despite the benefits of the services provided by these startups, some argue that the government ban raises legitimate concerns about letting companies like Tootle operate unregulated.

While essentially functioning as transport service providers, the companies are quick to distance themselves from the label and choose to identify themselves as tech companies, escaping the liabilities that come with it.  

In the case of Tootle, the riders are not considered employees, but “freelance entrepreneurs” as described by Bhatta, and hence, not the responsibility of the company.

As privately registered vehicles, none of the motorcycles offering their services to the apps is required to obtain commercial insurance which is a requirement for a regular transport service provider.

But Bhatta was quick to defend his company’s policy on not offering insurance to either its riders or passengers.

“Riding a Tootle doesn’t inflate your chance of being in an accident,” said Bhatta. “The risk is the same whether you are using Tootle or any other privately owned two-wheeler.”

Thapa, of Pathao, on the other hand, acknowledges it is the company’s responsibility to provide insurance to its riders and passengers, but said the market did not offer the type of insurance model they were looking for.

“We wanted to get an insurance policy that would cover riders and passengers for the duration of the commute but because there’s no such model in the market we have been unable to provide insurance,” he said. “We were working on designing such a policy with insurance companies but the ban has caused a distraction.”

Additionally, the screening process for riders is still rudimentary at best. At the moment, anyone with a driving licence and a two-wheeler can sign up to ride for both the apps. When questioned about the need for a more stringent policy, Bhatta said: “If the government has deemed them worthy of being issued licences then it’s a good enough screening process for us.”

Many supporters of the apps are questioning the motive behind the government action and asking “why now?” since Tootle has been in operation since 2017. Representatives from both companies told the Post they believe the actions are politically motivated and in response to complaints from local taxi associations about their diminishing market share.

“We heard from sources that people from Nepal Meter Taxi Association reached out to the Prime Minister’s Office which then issued orders to the Traffic Police Division,” said Thapa of Pathao. Thapa did not say who his sources were.

In an interview with the Post, representatives of the Nepal Meter Taxi Association admitted that it had been lobbying authorities to take action against Tootle and Pathao.

“We welcome the traffic police’s initiative to crack down on these companies,” said Arjun Prasad Gautam, chairperson of the association. “This was a long time coming and we are happy that they are finally taking action against illegal transport service providers.”

Government officials said they received complaints from “various places” but refused to identify them. In an interview with the Post, transportation officials said that if tech companies want to operate transport services, they have to be registered accordingly. 

“There are lots of things we need to take into consideration—from the safety of the passengers to the responsibility of the companies,” said Lawanya Kumar Dhakal, director general at the Department of Transport Management. 

But Dhakal, by his own admission, said the department is still deliberating if motorcycles should be allowed to function as public transport in the first place.

Both companies say they will now focus on lobbying to introduce new policies that will create an environment for businesses and startups to flourish.

“This is not just about Tootle,” said Bhatta. “This is a much bigger issue that will impact the overall e-commerce market of Nepal.”

Published: 16-01-2019 07:02

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