BENGALURU 17/NOV/2014: After pioneering a new kind of taxi booking experience for customers in India\'s major cities, mobile apps-based taxi-hailing marketplaces such as Uber and Ola are giving them a ride on another innovation a pricing one. Called \'surge pricing\', it is anchored in one of the fundamental tenets of economics demand and supply and has left drivers happy, consumers with mixed feelings and India\'s taxi industry, already buffeted by several epochal changes, now having to get its head around another innovation. These aggregator firms are increasingly adopting surge pricing to manage sharp demand spikes during rush hours, a practice that sees fares rise almost four-fold for consumers while ensuring availability of the service and leaves drivers pleased at the prospect of making some extra cash. Commuters booking cabs on their smartphones have in recent days had to contend with the apps on their phones throw up the surge pricing option during peak travel times, making a journey that can cost as low as Rs 40 per Kilometer during Rush hours.
Executives at Uber\'s India operations declined to participate in this story, but the company has, in the past, defended the practice. \"It\'s basic economics,\" Travis Kalanick, CEO of Uber, said in the company\'s official blog. \"We are able to get a far greater number of drivers on the system when surge pricing is in effect - higher prices encourage more supply to come online.\"
San Francisco-based Uber globally follows the practice of surge pricing in which it raises prices in increments as and when the supply of available cars gets tight and lowers them as and when demand goes down. Launched globally in 2012, surge pricing has been rolled out in every country. Uber has launched its services, including in India. In this country, however, less than 15% of its rides attract surge pricing, according to industry estimates