Ola ban in Karnataka: State govt open for talks

Karnataka kept the door open on Saturday to talks with local ride-hailing service Ola to avoid a ban that could help rival Uber build market share. Karnataka earlier this week issued a notice to suspend Ola`s licence for six months for violating government rules by running motorcycle taxis which are not allowed for safety reasons. State capital and technology hub Bengaluru is among Ola`s top three markets in India.

V.P. Ikkeri, state commissioner for transport and road safety, told reporters the department had seized and issued fines for about 258 bikes during a probe after complaints. Ola`s permit, obtained in 2017 and valid to 2021, allows it to run three and four-wheeler taxis in Karnataka. The company, backed by SoftBank Group Corp and Tencent Holdings Ltd, has until Monday to respond to the suspension notice.

"It`s a temporary suspension and if they give us a satisfactory response, then we won`t need to implement the ban," Ikkeri said, adding that Ola would face financial penalties. Ola did not immediately respond to a request for comment. It could lose out badly to Uber if pushed out of the market for an extended period.

"If Uber comes up with a strategy to lock in some of the drivers or customers with more incentives, it will be difficult for Ola to make a comeback," said Neil Shah, partner and research director at Counterpoint Research. "Assuming the top three (Indian) markets contribute to roughly 35-40 percent of Ola`s revenues, if the ban is upheld, we could be looking at a 5-10 percent revenue hit to the company."

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On Friday, the company said it was evaluating all options to find an "amicable solution" and was working closely with the authorities. Ikkeri also said the department had sent a notice about penalties to the last known address of Rapido, another motorcycle taxi operator in Bengaluru. Rapido could not be reached for comment despite multiple attempts by Reuters.