24/06/2016 11:03 AM IST | Updated 15/07/2016 8:27 AM IST

Uber Ditches Surge Pricing, In A Way

Remember that bolt icon while booking an Uber taxi which indicates surge pricing? The taxi aggregator seems to be doing away with surge pricing altogether. That however doesn't mean that you will not have to pay more when the demand is high. Uber is replacing the surge pricing model with one that provides users information about how much they have to pay upfront.

To give a bit of background, surge pricing is when consumers pay more than the base fare to taxi aggregators. The companies say that the surge kicks in when the demand is higher. The surge rate usually starts at 1.1 times the normal or base fare but has been known to go as high as nine times the base fare.

Total Fare = Base fare + Fare per minute + Fare per km after the base distance

The surge price is calculated based on the above formula, but Uber says now it will show riders a fixed cost instead of any complex calculation. The company is already using this concept in UberPool, where you share a ride with another rider. It has also been testing the fixed fare feature in UberX category in the US and India for some time.

"We moved to upfront, per trip fares—just like airlines and hotels—two years ago when we launched uberPOOL. This allowed us to calculate the actual fare in advance and show it to riders before they booked their ride. Knowing how much a ride will cost in advance is clearly something riders appreciate: today uberPOOL accounts for over 20 percent of all rides globally. And we now want more riders globally to benefit from this feature," the company said in a blog post.

One of the benefits for the rider in the new model is that even if a ride takes longer than expected because of traffic conditions, the fare does not change.

Uber also said that the route taken by the driver will not matter anymore as the fare is fixed upfront. Also, if you change your destination in the middle of a ride, you will get a notification for the changed price.

Uber has been in the news in India over its pricing and licensing practices. Couple of months ago, the Chief Minister of Delhi, Arvind Kejriwal, had expressed his strong opinion against the surge pricing and even warned taxi aggregators. Karnataka has also been trying to get taxi aggregators to come under the purview of the Vehicles Act. While Ola has received a licence to ply 100 taxis in Bengaluru, Uber is yet to get any official nod from the state government.

There have been changes in the drivers' incentive scheme as well. Some Uber drivers said that they had to complete a certain number of rides each in two shifts to receive any incentives. Recently leaked documents also indicated that on an average, an Uber driver in the US earns $13.25 an hour after expenses.

Contact HuffPost India