Regulating New Mobility I: What does India’s Motor Vehicles Act mean for shared mobility enterprises?

The Motor Vehicles Act of 1988 is the principal act of the Parliament of India that governs and regulates the road transport ecosystem in the country. It was enforced in June 1989 and is the go-to legislation for the granting of permits, registration of motor vehicles, licensing of drivers and conductors, insurance, liability, offences and penalties, and so on.

Over the last few years, many new business models have emerged that allow commuters to summon mobility options using services built on technology and innovative business models. However, the legality of these models are being questioned within the framework of the Motor Vehicles Act. As a result, players in this growing market that offer aggregator or ride-sharing services, are frequently in a deadlock with the authorities. Understanding the relevance of the Motor Vehicles Act is, therefore, pivotal for new mobility enterprises.

On 28 September 2016, WRI India Sustainable Cities and Zehn Legal hosted part one of a two-part webinar series on the applicability of regulatory frameworks governing motor vehicles for on-demand taxi aggregators and other shared mobility enterprises in India. Part one focused specifically on the Motor Vehicles Act 1988 and key sections, concepts and definitions within the Act. The webinar was delivered by Aditya Kini of Zehn Legal, a law firm that represents several shared mobility companies (motorbike, taxi, and bus aggregators) and provides input to state governments on policy. The key issues discussed in the webinar were:

The legal framework

Aditya Kini explained the legal framework of the Act, and how authorities function within its purview. The Motor Vehicles Act falls under the concurrent list which means both the Central and State governments have the power to regulate motor vehicles. Their specific roles, however, differ. While the Central government defines the kind of registrations and permits granted as per the intended use of the vehicle, the State issues the permits and creates licenses for their operation. The conditions under which licenses are issued therefore differ from state to state.

Definitions of vehicles and their intended use

The definitions of different vehicle types and their permissible uses, as stated in the Motor Vehicles Act, differentiate between transport and non-transport, and public and private service vehicles. The webinar defined and outlined the implications of these terms on new mobility models. For example, privately owned vehicles are categorised as non-transport vehicles and cannot be used for transport services that involve a commercial transaction. In order to be used for commercial purposes, vehicles have to be registered as such, and additionally, owners need to obtain the appropriate permit to operate. This complicates the operation of many ridesharing models.

Kinds of permits

A transport vehicle can hold one of four different kinds of permits: contract carriage, stage carriage, goods carriage, or a tourist permit. A few new business models have triggered a discussion on the appropriate use of stage and contract carriage permits. A vehicle with a contract carriage permit is authorised to carry passengers from point-to-point for a fixed or agreed rate but cannot pick-up or drop passengers during the journey. A vehicle with a stage carriage permit, on the other hand, is authorised to pick-up and drop passengers during a journey, can charge separate fares per passenger in stages, but must operate on fixed routes and schedules. Both permit conditions are mutually exclusive.

Insurance requirements are also linked to the kind of permits. For instance, the type of insurance mandatory for commercial vehicles differs from the kind of insurance for private vehicles, as commercial vehicles have to obtain additional coverage for passengers as well.

The webinar also addressed other topics such as regulation around peer-to-peer ride-sharing, motor bike taxis, and insurance requirements for different services. The full recording of the webinar can be accessed here.

Part two of this series was held on November 8th, 2016. This session focused on how the regulatory environment is changing vis-à-vis the Motor Vehicles (Amendment) Bill, 2016, which grants greater independence to state governments to formulate their own policies, combat congestion, increase last mile connectivity, and better utilise transport assets.