India's federal transport ministry to allow Uber, Ola to operate

NEW DELHI (REUTERS) - India's transport ministry will ask states to allow U.S.-based taxi-hailing firm Uber and its local rival Ola to operate, a senior official said, in a move that could help clear regulatory ambiguity faced by the companies in New Delhi.

India in December ordered all unregistered web-based taxi companies to halt services until they obtain an operating licence after a driver contracted with Uber was accused of rape.

Uber and Ola continued to operate in New Delhi while their licence applications were pending approval, prompting local authorities to propose blocking their mobile applications.

A senior official at the federal transport ministry said an advisory detailing how such web-based taxi firms can be effectively regulated will be sent to all states within three weeks. "We see that these companies are bringing value to the economy and the people," the official said on Thursday. "Any innovation in technology should not be banned."

A spokesman for Uber welcomed the move. Ola, which is backed by Japan's SoftBank Corp and has just attracted more than US$300 million (S$ 406 million) in fresh funding, did not immediately respond to a request for comment.

Companies such as Uber and Ola connect passengers with contracted drivers through their mobile apps. After the December incident, the Indian authorities said such firms were flouting taxi rules and not running proper background checks on drivers.

Still, with rising smartphone use, the companies remain bullish on the Indian taxi market that, according to Ola, is estimated to be worth US$8 billion to US$10 billion a year.

The transport ministry official, who requested anonymity due to the sensitivity of the matter, said India's federal states should not over-regulate such companies.

When asked whether the advisory would make it binding on states to allow Uber and Ola to operate, the official said: "If the advisory is logical, how can they say no to it? They should not kill innovation."