Uber forced to suspend surge pricing in Delhi

Local government will impound cars found to be increasing pricing above a set limit.

Uber has announced that it will suspend surge pricing in Delhi after the government moved to protect locals from overcharging. The city is testing a Chinese-style odd-even rule to combat pollution, so only cars with odd (or even) license plates can drive on certain days. Uber had subsequently imposed surge pricing to encourage more drivers to pick up the slack. The city's leaders had other ideas, imposing a set tariff to prevent transport firms like Uber and Ola from taking advantage. According to Mashable, Uber fees had increased by up to five times the going rate.

As it stands, Uber says that surge pricing is implemented by algorithm, kicking in only when demand outstrips supply. The higher charges are designed to encourage more drivers to get onto the roads and make a fast buck even faster. It's a situation that prompted outcry from locals and led to the city regulating prices to ensure people weren't getting gouged. The new tariff was enforced with career-ending penalties, with violators risking their car and their driving license.

Uber was its usual passive-aggressive self, saying that it would axe surge pricing "given the threat to the livelihood of our partners." It also opined that the Delhi government was "interfering with market dynamics," causing a drop in cars and a "negligible impact on requests." Although given Uber's traditionally hostile attitude toward any attempt to make its service safer and cheaper, that wasn't a huge surprise.

Delhi's decision does allow us to watch Uber operating under lab conditions, since we can see what effect flatter pricing will have on demand. If the city's residents are still able to take cars without much delay, then it could erode the company's famous line that surge pricing is an important component of its business. That, combined with customer pressure to protect individuals from price gouging could have a big impact on how the company operates worldwide. We've asked Uber for its feelings, and will update this if we hear back.