While the PM has announced ‘Make in India’ with great fanfare, innovative companies like Uber and Amazon are getting a taste of laws made in India
This is not what prime minister (PM) Narendra Modi had in mind when he launched his high-profile ‘Make in India’ programme on 25th September. Yet, ironically, two multinational companies, Uber and Amazon, seem to have fallen prey to the large swathe of ‘made in India’ regulations that make it very difficult to do business in India.
Uber and Amazon are considered two of the most innovative companies in the world, so it would have been a big surprise if they had not fallen foul of India’s notoriously turgid bureaucracy.
Not only has the Reserve Bank of India (RBI) taken objections to Uber’s payment model and the Karnataka tax authorities with Amazon’s e-commerce model, but, typically, the Enforcement Directorate is also investigating Amazon.
The Department of Revenue Intelligence may also jump in to raise issues of violation of forex laws. That we, the people, find their services excellent, efficient and cost-effective, is of no interest to the rule-makers nor push them to find a quick solution. That is how the ‘Made in India’ legal and enforcement system works.
Uber is a global tax cab company. In order to hire a car, you need to download a phone application, supply credit card details and call a car. Once your ride is booked, the hi-tech system allows you to track the car to your pick-up point. At the end of the journey, your credit card is automatically debited and the invoice mailed to you.
Uber’s clean and easy transactions and aggressive pricing (almost on par with auto-rickshaws for an air-conditioned sedan ride) was growing fast enough to unnerve the competition. They complained to RBI which immediately said that the absence of a two-stage authentication on the credit card transaction and use of a foreign payment gateway violated Indian rules.
In Amazon’s case, the tax authorities in India decided that, since Amazon pre-orders certain popular products and stocks them in its warehouses, it is not an electronic marketplace but a reseller and falls foul of sales tax.
To expect Indian regulators to anticipate and permit an innovative business model is to be out of touch with reality. The two MNCs would have been better advised by their lawyers and consultants, based on the experience of a series of technology companies in the past five years—that they should be prepared for draconian coercive action, including raids and worse, which could shut down their business in India.
Commentators, who argue that India will send the wrong signal by attacking Uber and Amazon, are out of touch with everything that was happening in India in the past 10 years. Yes, we have a new government that promises change, but to expect the elephant to move with the speed of a gazelle is unreal.
In fact, although the PM launched a high wattage ‘Make in India’ campaign just before leaving for the United States, nothing has changed on the ground when it comes to cutting red-tape.
Medium to large companies are forced to spend significant sums of money on legal fees only to deal with the harassment by tax and enforcement agencies. Most of them have legitimate money blocked by endless tax-related litigation. Please notice that the retrospective legislation following the Vodafone case has been left untouched by Modi sarkar and the dispute is still not settled.
Doing business in India means that Uber and Amazon should be prepared for similar skirmishes with numerous municipal and state level regulators and law enforcers, whose rulebook often dates back to the 19th century. Indian businesses have learnt to live with these hassles or to ‘grease’ their way forward—all this adds to the cost and hassles of doing business in India.
Coming back to the Uber case, some commentators have argued that RBI cannot be a regulator, supervisor, investigator and enforcement agency, all rolled into one. But it has combined those roles for over 65 years and Indian banks and companies have lived, and died, by its capricious rules.
Let’s not forget how a sudden change in RBI’s rules in the mid-1990s caused most non-banking finance companies to go belly up leading to thousands of depositors losing hard-earned savings invested with them. Nobody held RBI accountable because that is how India has worked.
Uber gives dignity to millions of Indians who, in the absence of adequate public transport, have to beg and plead and give in to extortion by auto-rickshaws and taxi-drivers. Amazon delivers products to your doorstep cheaper and faster. All this cuts no ice with Indian lawmakers or regulators. They are not obliged to look for a solution that helps people; they’d rather stick to old rules—even as those rules are violated with impunity.
But there is a slight chance that things may be different this time. Public pressure for better services, conveyed directly to the PM via social media, could make a difference.
Mr Modi’s own experience of using technology innovatively to reach the people should make him sympathetic to innovators. I believe that only a direct request from the PM will push government agencies to re-work rules quickly so that people benefit from innovation.
It is RBI’s stated policy to push people to switch from cash and cheque to electronic transactions. Based on this, Uber’s payment process should have been held up as the model for others to follow. But there is a big gap between RBI’s stated goals and its actions.
According to media reports, Uber is working at integrating a digital-wallet into its payment process through a tie-up with a couple of mobile payment gateways. Will this work? Remember, in the eight years since it closed down the Times of Money’s e-wallet or stored value payment card, we have yet to see an effective e-wallet with low transaction costs attract sizeable customers in India.
RBI has also been impervious to consumer protests about ‘convenience charges’ levied on electronic transactions. A workable e-wallet system, with low transaction charges, is the ideal solution for small-value online transactions to buy movie tickets, books, flowers or pay taxi fares, where the value at risk is low and there is no need for two-stage authentication. But, there again, RBI is worried that these low-denomination transactions will be used for gambling, lottery tickets and worse, to launder money.
But e-commerce in India is a $2.3billion business, which is growing at a scorching pace and companies will keep innovating for a piece of the action. While existing e-wallets offered by some banks are tedious, worth the effort only for high denomination transactions, new ones are being announced every day.
The Indian Railway Catering and Tourism Corporation (IRCTC) has launched an e-wallet which is structured as a rolling-deposit scheme where customers can maintain an account with IRCTC for e-bookings, which is topped up from time to time. This is to reduce the current hassles and risk involved in using credit and debit cards on the IRCTC system. The Citrus Pay app is another one that allows users to load value on an e-wallet from a credit or debit card.
It remains to be seen if Uber will find its way around RBI regulations or we will see the dawn of a new era, where the ‘Make in India’ is not just a slogan but a signal to regulators, policy-makers and investigation agencies to also move with the times to help and facilitate businesses that consumers want.
(Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at [email protected]
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I do not mince words. I do not use pseudo names to criticise. I call spade a spade. If you find it offensive, then my apologies but the fact remains. This story is just badly researched, and that remains a fact. Humans do make errors...
Your story states...
"Uber’s clean and easy transaction and aggressive pricing (ALMOST ON PAR WITH AUTO-RICKSHAWS for an air-conditioned sedan ride)"
IN ANY CASE, A LAW OFFENDER CAN OFFER SERVICES CHEAP. BUT EVEN THAT IS NOT THE CASE HERE...
Here is the fare comparison for Mumbai:
Uber X (mini):
Min Rs. 50 + Rs. 15/km + Rs. 1 for every minute travelled. In other words, pay a minimum for Zero distance included, then pay for the distance, and also for the entire travel time. Rs. 15 per km would turn out to be something like Rs. 20~21 per km for a 25 km ride with moderate traffic.
Local Taxi:
Min Rs. 19 for 1.6 km, thereafter 13 per km.
Ref: http://mahatranscom.in/pdf/B%20&%20Y%20M...
Auto Rickshaws:
Min. Rs. 15 for 1.6 km, thereafter 10 per km
Ref: http://mahatranscom.in/pdf/Tarrifcardfor...
Here is the payment comparison:
Uber:
Credit / Debit card on file. Charge debited to a company outside of India without 2 tier authorisation. No provision to remove stored credit / debit card details. Uber does not disclose its phone number, email address, or even a postal address in India. What it discloses is a twitter handle. So if there is an unauthorised charge, one cannot even send out a legal notice to a company in India.
Local Taxi / Auto Rickshaw:
Cash. The driver may want to charge extra, but cannot clean up your bank account.
Here is the Permit comparison:
Uber (the cash rich daddy): No Permit to operate point to point services. Violation of various sections of the CMV Act, and tax laws for which they are being investigated.
Taxi Permit (For Taxi owner):
Source: http://mahatranscom.in/pdf/Taxi_Permit_E...
Eligibility Criteria
Applicant should be a citizen of India.
Age limit : - On the date of application, the age of the applicant should be 20 years and above.
Educational Qualification: - Applicant must be 10th standard pass, however if enough number of applications of 10th pass candidates are not received, then the applicants, who are 8th standard pass, would be considered.
General Terms and Conditions are as follows
Applicant should be resident of Mumbai Metropolitan Regional Transport Authority (MMRTA) area and should hold driving license having present residential address in MMRTA area Permit will be granted by the office in whose jurisdiction the applicant resides. Area of operation of the permit will be total MMRTA area. e.g. Applicant residing in Panvel city will have Driving License & badge having address from Panvel city & issued by RTO, Panvel. Taxi Permit will be issued by RTO, Panvel valid for whole of the MMRTA area.
MMRTA area means MMR area as defined in schedule 1 of „The Mumbai Metropolitan Region Development Authority Act, 1974‟.
Applicant should hold valid LMV (Tr) or Transport Vehicle (HGV/HPV) driving license and public service vehicle authorization (badge) for taxi or auto rickshaw issued by RTO/ Dy RTO office in MMRTA area as on the date of submission of application.
Applicant shall have knowledge of local language (Marathi) and local topography.
Applicant should have stayed in Maharashtra for at least 15 years continuously.
Successful applicant shall have to produce certificate from Police Department (Police Station in whose jurisdiction he/she is staying) stating that no cognizable offence is registered against him/her during the last one year.
Successful applicant shall have to produce self-declaration stating that he/she is not in the service of Government/Semi Government/Private Company or any other organisation/firm (organized sector).
Successful applicant shall produce self-declaration stating that he/she is not holding another auto rickshaw/taxi permit in his/her name.
There is no reservation for any type of class or person.
III. About the taxi to be endorsed on the permit
1. Taxi to be endorsed on permit shall be operated on CNG in Mumbai & in areas outside Mumbai where CNG pumps are available & on LPG/ Petrol in rest of area.
2. Fitment of digital electronic fare meter at prominent place so as to be clearly visible to all passengers with printer of approved type is mandatory.
3. The vehicle to be endorsed on the permit shall be a new taxi.
4. In future if Government/ Transport Commissioner/Concerned Authority decides to make it mandatory the fitment of GPS/GPRS, RFID Tag, Tachometer, Roof Top Indicator etc. in taxi, the permit holder shall have to install it on his/her own.
5. If an applicant submits more than one application, all his/her applications shall be treated as cancelled and the applicant will not be eligible for further selection process or the lottery draw.
Display of RTO complaint (Toll Free) Numbers, Police and Women‟s helpline numbers at prominent place so as to be clearly visible to all passengers is mandatory.
Display of colour copy of Permit along with driver‟s license at prominent place so as to be clearly visible to all passengers is mandatory.
I think you probably missed the broader point about the article. I see this article more about a certain opinion than as a platform to promote Uber. Great service from Uber is an illustration of the author's broader point that the Indian sarkari system is more an obstruction than an aid for people.
The sarkari babus refuse to change with time and come in the way of new evolving technology and new business methods. They block new ideas quoting the outmoded acts, laws and rules. I don't know why you pasted the rules of taxi permits, but if anything, it only shows that they make doing business difficult. That in fact supports point of the article.
You say "IN ANY CASE, A LAW OFFENDER CAN OFFER SERVICES CHEAP." The counterpoint could be that those 'laws' were not made with Uber like service in mind. The laws might not even apply to Uber. More importantly, your statement can imply that the law is coming in the way of offering cheaper and better services. It is as if the people are made to obey the laws and not the laws are made to aid people.
Apart from Uber, Sucheta has cited other examples too including Amazon, Vodafone and RBI. I can also think of Flipkart, import restrictions on white goods, cable TV, e-rickshaws in Delhi, and so on. In these examples it appears as if the government acts against the consumer interests rather than protect them.
I did not miss anything. Maybe you did. Do not selectively quote me.
I stated...
"In any case, a law offender can offer services cheap. BUT EVEN THAT IS NOT THE CASE HERE..."
Sucheta wrote, "Uber’s clean and easy transaction and aggressive pricing (ALMOST ON PAR WITH AUTO-RICKSHAWS for an air-conditioned sedan ride)"
Go ahead and read on all that is stated by me. Google a bit and you will find how brazen Uber is in its alleged anti-competition / anti-consumer approach.
RBI's action is purely in consumer interest. It cannot allow a company such as Uber to operate in India but debit charges to a company outside of India without 2 tier authorisation, would not allow consumers to remove their stored credit / debit card details, won't its phone number, email address, or even a postal address in India, but what it would discloses is a twitter handle. So if there is an unauthorised charge, one cannot even send out a legal notice to a company in India.
BTW, Uber and some other cab aggregators are also allegedly in contempt of the orders of the Supreme Court of India... But I would leave that for Money Life to investigate for itself.
The law of the land applies to all. Uber is no exception.
BTW Ankur, are you suggesting that a poor cab operator must comply with all the prevailing laws but cash rich corporates with a battery of lawyers to defend them, be allowed to break all laws?
I am not going into whether Sucheta is correct in saying that Uber's services were cheaper. I would just take her word for it -- may be she indeed paid less for a ride. How would anyone know otherwise?
I am pointing to the general drift and aim of the article, which is, that the laws/rules in India are archaic and come in the way of business. Uber is only an example. If Uber's services are too costly or of poor quality, let the market not accept them.
You say that the law of the land applies to all. But what if Uber is not a taxi service? What if tomorrow a mobile app enables car poolers to join hands, where instead of sharing their cars, they pay each other? Will taxi rules be applicable there or will the rules ban car pools?
I am not suggesting "that a poor cab operator must comply with all the prevailing laws but cash rich corporates with a battery of lawyers to defend them, be allowed to break all laws". The article's point is that these "laws" (actually rules. remember that these rules are made by and implemented by neta-babu who, more often than not, are corrupt) are often onerous. They come in the way of businesses, whether small businesses or large businesses.
It is well known that India ranks at the bottom of ease of doing business rankings. I can't see why would anyone disagree with this article. This point is as evident as it can be.
If Uber can operate successfully in several countries delivering customer delight, why can't it operate here too? If credit card transactions can be done safely without double authentication (or whatever way they are done) in dozens of countries, why not in India too? I am not conversant with the complex rules of taxi business. But the higher level point still stands -- if businesses can run so well in over 100 countries then why not in India too? So what if Uber debits the money to a foreign country? The credit card user always have the option of blocking a transaction (charge back) if he feels that he was wrongly charged.
There is always reasoning like "these rules are meant for protecting the customer", or this or that. But do they even succeed in that objective? The businesses in India are subjected to hundreds of checks and balances. But are they still delivering the best products to customers with all honesty? While in theory, these rules sound great but in practice these rules achieve nothing except deterring honest businesses and supporting the corrupt businesses.
I have done a lot of work on fleet cabs and what rules are followed and flouted.
also, the reference to auto fares was in a context and were clearly aggressive introductory fees.
We also believe in calling a spade a spade, but you can't call it a bloody shovel and be as aggressive.
Anyway . I dont intend to respond to this anymore, because I have NO INTEREST IN UBER OTHER THAN BEING A SATISFIED CONSUMER. I am needlessly being put in the position of defending a global corporate that can take care of itself.
But your allegations about the company and claims about it being a law offender will be referred to our webmaster. We cannot take responsibility for our intemperate comments.
Maybe you did not see this development.
http://articles.economictimes.indiatimes...
Uber is in violation of CMV Act as well as tax laws. Some other cab aggregators probably also fall in the same bracket.
What is shocking and even hard to understand is that Uber would not disclose its contact details? No phone number, no email, no address? Just a twitter handle?
The credit card is charged by a company in Netherlands. It bypasses RBI mandated 2 tier authorisation. Worse, Uber would also not allow to delete credit card information.
And FYI, Uber fares are not cheap. Comparing them with Auto fares shows how badly is this story researched. A base fare + per KM charge + charge for the entire time taken for the ride.
Like it or not but that is the fact.
Uber is in violation of CMV Act as well as tax laws. Some other cab aggregators probably also fall in the same bracket.
What is shocking and even hard to understand is that Uber would not disclose its contact details? No phone number, no email, no address. Just a twitter handle?
The credit card is charged by a company in Netherlands. It bypasses RBI mandated 2 tier authorisation. Worse, Uber would also not allow to delete credit card information.
And FYI, Uber fares are not cheap. Comparing them with Auto fares shows how badly is this story researched. Like it or not but that is the fact.
And FYI, Uber fares are not cheap. Comparing them with Auto fares shows how badly is this story researched. A base fare + per KM + chare for the entire time taken for the ride.
Like it or not but that is the fact.
You may have your views, but I find your allegations offensive.
Like we do with the claims you make about brokers cheating you and SEBI not responding, we check this too.
We have used UBER personally. Found it extraordinarily good and in Mumbai, the fares are ACTUALLY below that of black and yellow, non-ac cars.
When you compare with the rip-off at the airport in pre-booked fleet cabs and other cabs, the difference is extraordinary.
it is a pity that more people dont know about it.
As for the rest…. read again, we have said some kind of solution must be found to ensure that we the people are not deprived of a good service.
In mumbai some of the fleet cabs are owned by those with underworld links -- you have have a personal issue with UBER, but please do not use that to make unfounded allegations here.
These are some of my favourite quotes from the article:
"To expect Indian regulators to anticipate and permit an innovative business model is to be out of touch with reality."
"Yes, we have a new government that promises change, but to expect the elephant to move with the speed of a gazelle is unreal."
"...whose rulebook often dates back to the 19th century"
"...cheaper and faster. All this cuts no ice with Indian lawmakers or regulators. They are not obliged to look for a solution that helps people; they’d rather stick to old rules—even as those rules are violated with impunity."
"...ideal solution for small-value online transactions to buy movie tickets, books, flowers or pay taxi fares, where the value at risk is low and there is no need for two-stage authentication. But, there again, RBI is worried that these low-denomination transactions will be used for gambling, lottery tickets and worse, to launder money."
I am sure Uber and Amazon would be come up alternate mechanism acceptable to RBI and GOI in general.
India is one of the markets with low credit card fraud precisely because of the checks that RBI has introduced. All Indian companies have to follow those rules. If a non-Indian company could easily circumvent the problem by taking credit card data and processing it outside India, what prevents Indian companies too from opening foreign subsidiaries and routing payments through them!? This would basically make a joke of the RBI rules - which, may I point out Mrs. Dalal, are for the consumer's benefits on whose side you usually fight.
The Amazon fiasco is a different story. If the current laws do not allow them to act as reseller then it is indeed a technicality as to whether they are flouting the laws or not. If not, the state will lose - good riddance for Amazon who can prosper perhaps in Gujarat! If yes, then it is sticky.
Hopefully these innovative companies will find ways to comply with the regulations AND also win in the market.
But for you to use them to make your point is only diluting your point and I wouldn't blame RBI for not taking it seriously in this context.
Let me point you to the following lines from the article:
"...small-value online transactions to buy movie tickets, books, flowers or pay taxi fares, where the value at risk is low and there is no need for two-stage authentication. But, there again, RBI is worried that these low-denomination transactions will be used for gambling, lottery tickets and worse, to launder money."
Because RBI is fearful of laundering, it is not letting an otherwise legitimate service run. This is a warped logic! If we were to go by this logic, RBI should ban cash itself because one could buy illegal things with cash too.
This mindset is problematic because it favours status quo. It says that don't change anything because it might cause a (mostly small) problem somewhere. This mindset prevents India from growing in this modern age.
Also the main focus is Uber which is damn good for us Indians. We pay less for great service. If one has to rant to get the RBI to see sense and have workable e-wallets them let MORE OF US RANT. It is good for US the consumers!!
Also, you can keep POINTING issues out to me or join us in the HARD WORK that it takes to fight for consumer rights -- we do it through moneylife foundation. I would like to see you volunteering to take the right forward and become a ranter rather than an advisor :-)) Will you do that.
Check out http://foundation.moneylife.in
I appreciate your 100% capitalist and "free market" attitude ! I am sure Narendra bhai has similar views which he has expressed by his one decade's work in Gujarat and by his pre and post election statements ? Let us give him , at least 2 years , to rock the boat which is stuck during last 10 years of SMS ( Sardar Manmohan Singh ) rule !
One of the commentaries I read when this Uber related notification came was about how technology implemented by Uber saves millions of minutes of both the rider community and driver community by saving them from the hassles of searching for change or getting payments effected. That sort of technology intervention raises productivity of people manifold.
People also say what's the harm in RBI asking customers to enter a one time password or PIÑ for authenticating that the rightful owner of the card is using the card. For low value of the transaction, making hundreds of thousands of customers expose their PIN numbers for a card not present transaction would probably cause more problems down the line.
Is modi fenzy or BJP STOUT HAVEING LOT'S OF PREJUDICE TO CONGRESS BUT BJP AND CONGRESS IS TWO SIDE OF ONE COIN ONLY
MAKE IN INDIA WILL PROVE SALE INDIA OUR PM DURING HIS VISIT TO US LOUDLY proclaiming THAT WE HAVE 65% OF OUR POPULATION IS YOUNG SO U WHITE PEOPLE'S COME DO BUSINESS WE WILL PROVIDE U SLAVES THUS LOTS OF EAST INDIA COMPANY WILL COME WE WILL FURTHER BECOME SLAVES ATLEAST FINANCIALLY
“The positive approach to doing business which helps Bezos keep smiling all through is admirable and worth imbibing by any entrepreneur anywhere in the world.
The $2 billion cheque brought in by Amazon is a good omen when Prime Minister Modi is inviting the world not only to do business in India but to ‘Make in India’ and do business with the rest of the world. The World Bank Group(2013) which rated India at 179 under the parameter ‘Starting Business’ in a group of 189 countries, should revisit its assessment and see how many of the countries which were positioned above India got an individual single external investment of $2 billion or above in 2014.
The assertion made by Bezos that ‘Every country in which we do business, there are regulations. Our job is to accommodate those regulations. So, let us use it as an opportunity, instead of just complaining about it.’ should be an eye-opener for all those who grumble about business environment in India.
This is not to say that business environment in India is perfect and needs no improvement. But the progress made in improving the ‘ease to do business’ by various states and the present efforts by the central government to make things better need to be taken note of, and position taken by Amazon and its CEO Bezos makes sense in this context and stands alone in the whole mess up in comparisons by international rating agencies.”
M G Warrier, Mumbai