In today’s Finshots, we tell you why Karnataka desperately needs a policy framework on bike taxis.

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The Story

This week, Bengaluru’s traffic police cracked down on more than 100 two wheelers offering bike taxi services. After all, they were ferrying passengers on private bikes, which isn’t allowed under current rules. Because only vehicles with commercial registration and valid permits can be used to carry passengers.

But this didn’t happen overnight. The tussle between bike taxi aggregators and the state’s Transport Department has been simmering for years. Officials have repeatedly pointed out that personal two wheelers being used for paid rides are technically breaking the law. 

In fact, Rapido, one of the biggest names in the game, did try to fight back. They went to court, hoping for a stay on the ban. But the High Court wasn’t convinced. And from Monday (June 16th), operators were forced to shut down bike taxi services across Karnataka or risk legal trouble.

Now, you could say that this is a classic case of startups needing to do their legal homework before launching services. But it also raises a bigger question: Why didn’t Karnataka just create a policy to regulate bike taxis instead of banning them outright?

It’s not like there was no demand. In fact, bike taxis became a go-to option in post-pandemic Bengaluru. They were cheap and perfect for beating the city’s traffic snarls.

But not everyone was happy. Autorickshaw unions pushed back hard, calling for a total ban. The government did float an e-bike taxi policy in 2021, but it was rolled back last year over concerns about safety and misuse.

And since then? Nothing.

The government hasn’t moved to set clear rules or bring in a fresh framework.

The end result was more crackdowns, more confusion, and a promising mode of urban transport stuck in regulatory limbo.

Funnily enough though, if Karnataka brought in a proper framework to regulate bike taxis, it could pocket some decent revenue. Just think about it. The state has around 1.2 lakh active bike taxi riders. Now, if each one had to pay a ₹1,000 permit fee to operate legally, that alone adds up to ₹12 crores a year. Toss in a few more lakhs from aggregator licenses and permits, and you’ve got a tidy sum.

And that’s just the start.

The state gets about 8 lakh rides every single day. And if you factor in a 5% goods and services tax (GST) on an average fare of ₹50, and you’re looking at another ₹73 crores in indirect taxes annually.

All in all, the state could be letting go of around ₹85 crores a year. And sure, that might sound like a lot to you and me. But for the state it’s pocket change. We’re talking about less than 0.05% of what it already rakes in from motor vehicle taxes, permits, registrations, all the other transport-related collections and the state’s tax revenue put together.

Maybe that’s why there’s no rush to legalise things. After all, there’s no major fiscal pressure.

On the flip side, it might be choosing to keep autorickshaw drivers happy, not just because they’re the backbone of the transport system, but also because they’re a sizeable votebank the government can’t afford to upset.

But hey, that’s not really our territory to comment on. So we’ll stick to what we know ― that by holding back on long term regulation, the state might just be choosing a trade-off that could come back to bite.

Why’s that, you ask?

Because this ban isn’t just about business or side hustles, it’s about livelihoods. For context, a KPMG report says that most bike taxi drivers take up the job to cover emergency expenses or run their households. In fact, they contribute nearly 60% to the family income. And for a state that proudly boasts the lowest unemployment rate in India at just 2.5% or half the national average, it’s not a great look to push thousands out of work and nudge up joblessness.

The bigger problem is also the precedent this sets. It sends a loud, worrying message to anyone building something new, that innovation might be shut down instead of shaped.

The thing is that startups thrive on clarity. They need predictable regulations to raise money, grow and experiment. But when a state like Karnataka pulls the plug on an entire category of business, just because there isn’t a rulebook in place, it spooks founders. It makes them think twice before launching or scaling anything in the state, for fear that they’ll run into the same dead end.

And let’s not forget competition. On the surface, it may look like bike taxis are eating into the earnings of auto rickshaw drivers by offering cheaper short rides. But that’s how markets evolve. Quick commerce disrupted kiranas. But did we ban grocery delivery apps? No. We’re trying to regulate them. So why single out bike taxis?

Besides, scrapping an entire segment doesn’t just reduce consumer choice, it also gives more pricing power to cab aggregators and auto drivers. With one less player in the mix, it becomes easier to hike fares or slap on surge fees, especially for short distances. And commuters are left with fewer and costlier options.

So the simple fix?

Regulation. Other states have already shown the way.

Maharashtra allows licensed operators with at least 50 electric bikes, with rules around GPS tracking, driver police verification, trip limits and mandatory passenger helmets. West Bengal is exploring short term authorisations of less than a year to let bike taxi drivers come and go from the profession easily. Even Delhi permits only e-bike taxis.

So yeah, regulation really does seem like the best middle ground.

Because if the government keeps dragging its feet, it’s not just missing out on a chance to organise the chaos, it might actually be hurting its own economy in the long run.

And let’s be honest, bans don’t always work. Especially not in the world of jugaad.

Some bike taxi players are already finding clever workarounds. One of them seems to have come up with a genius loophole — if passengers aren’t allowed, what about parcels? So now, they’re labelling passengers as “parcels” and transporting them across the city like courier packages.

Technically, you can now parcel yourself to work!

It’s like the state’s trying to kill off bike taxis, but they keep coming back — resurrecting themselves each time like Lord Voldemort, just with more creative disguises.

Until next time…

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