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Why It Matters

Pitfall in taxi surge pricing?

If you can't beat them, join them?

Four taxi firms - SMRT, Premier, Trans-Cab and HDT Singapore Taxi - are expected to roll out a "dynamic pricing" option later this week, a pricing mechanism used by private-hire services Uber and GrabCar. ComfortDelGro said it will hold off dynamic pricing for now, and Prime has not given a firm indication of whether it will introduce such a system.

While flat charges are a welcome alternative to the complicated taxi fare structure, they are also less transparent, and could result in cabbies hiding and waiting for fares to creep up. The availability of cabs for street-hailing may suffer as a result.

As it is now, some cabbies wait until after midnight to earn the 50 per cent late-night levy. Dynamic pricing could exacerbate this.

Ride-hailing apps use algorithms to calculate fares, and commuters are in the dark about the premiumthey actually pay during a period of high demand. The suggested dynamic pricing system will have cab firms quoting a single flat fare when commuters book their taxis through a new function in the Grab app, called JustGrab. Such a system would make the present taxi fare structure less complicated. Now, flag-down charges range from $3.20 to $3.90, and there are at least 10 different types of surcharge.

The appeal of a simpler fare system is clear. Ride-hailing apps have won over commuters as the charges are generally lower during off-peak hours. The apps also do not levy a 50 per cent surcharge after midnight.

By adjusting fares in real time based on supply and demand, taxis can possibly be priced more competitively against private-hire cars throughout the day. But if taxi firms adopt dynamic pricing, will it also allow fare levels to rise and fall unbridled?

Surge pricing adopted by the apps has drawn flak from some commuters, after fares rocketed during periods of exceptionally high demand.

Taxis are often seen as the bridge between public transport and private car ownership. If fares are left entirely up to market forces, they could very well be priced only in favour of those with deeper pockets.

A version of this article appeared in the print edition of The Straits Times on March 21, 2017, with the headline 'Pitfall in taxi surge pricing?'. Print Edition | Subscribe