Cabs were once considered a luxury rather than a need by the general public. Cabs were formerly out of reach for the poor and lower middle classes. Because of modernisation and digitization, nearly every individual in the nation owns a smart cell phone. To avoid the congestion of public transportation and to achieve comfort, the average man prefers cabs/cabs, making it one of the country's thriving markets. Citizens who are wealthy enough to possess a car to choose cabs to avoid having to hire a driver separately. We may now get a cab from the comfort of our own homes by dialling a number or using an app.

Providing Structure to Businesses

When starting a cab business in India, one must choose a proper structure appropriate for him/her. 

The compliances to follow for setting up a sole proprietorship are much less. However, the danger of loss in the firm will appear frightening because a single individual must bear all losses.

If the business structure is a partnership, a registered partnership agreement with precise terms regarding everything, including responsibility, profit and loss sharing, and so on, must be in place. By filing an Application u/s 58 of the Indian Partnership Act, a partnership firm can be incorporated with the Registrar of Companies.

If the business form is a Limited Liability Partnership, where partners' liability is limited, registration with the Registrar of Companies is required. The setting up of a limited liability partnership is completed fully online. During the registration procedure, an LLP agreement must also be signed.

A lengthy registration and incorporation process is required if the business structure is a Company. In addition, the firm's Memorandum of Association & Articles of Association must be filed to the Registrar of Companies. A Public Limited Company can raise cash from the general public, whereas a Private Limited Company requires the investor to make the complete investment.

As a result, before launching a cab service, one must thoroughly examine the business structure that will be used. When organising the cab business, one must consider aspects such as the size of the firm, cash availability, risk-sharing capabilities, regulatory needs, and so on.

Types of cabs

There are two types of cabs available in the market. These two types are i) Radio cabs and ii) Traditional cabs.

In India, the traditional cab sector is losing ground. Traditional cab businesses comprise (1) individual cabs and (2) companies that own several automobiles and so conduct cab businesses (Eg. Fast Track Call cabs, Meru Cabs, etc.). However, this form of the conventional cab business is no longer desirable, and consumers prefer the current variety, i.e. Radio cabs, due to their ease of access.

Radio cabs have GPS systems installed, allowing cabs to be ordered online and the cab driving route can be traced.

The Motor Vehicles Act governs the cab business in the country. However, with the advent of technology, since the cab business is making it possible for people to book cabs online, it would be better if the scope of the Information Technology Act is widened and the radio cabs come under the preview of the Information Technology Act. 

Note: Radio cabs like Uber and Ola cabs have GPS installed in their systems for better experiences and safety of the passengers.

Registration Process of Cab Business & Acquiring Permits for Vehicles

The registration process for cab business and acquiring permits for vehicles involves the following steps and compliances.

Step 1

When acquiring automobiles for the cab industry, it is critical to ensure that the vehicles are cab-type and economically accessible.

Step 2

Once acquired, the vehicle must be registered with the District Transport Office/ Regional Transport Office (as it is known in that specific State) within 7 days of the date of purchase, as required by Section 39 of the Motor Vehicles Act, 1988.

The transport authorities issue the registration certificate to the owner. Driving unregistered automobiles is a violation punishable by a fine of Rs.2000/-.

The websites and application forms vary depending on the Transport Authority in the state where the car was acquired.

Step 3

The cab must be insured so that it may be utilised if the cab causes hurt or damage to a third party. Vehicle insurance may be purchased from a variety of insurance firms by completing their application forms and following the numerous essential steps outlined by the insurance company.

Step 4

It must be ensured that the vehicle has received the necessary environmental clearances from the state authorities.

Vehicles Permits

Not all vehicles are suitable for cab services. In addition, certain vehicle permissions are necessary to move persons or commodities from one location to another. As a result, permission to transport passengers must be obtained from the Regional Transport Office/State Transport Office by completing the appropriate documents.

Passenger transportation contract

Furthermore, an application must be submitted with regard to contract carriage of people, which occurs when the owner/driver transports passengers under a contract to a certain location for a specific fee. The application must be filed in compliance with Section 73 of the Motor Vehicles Act of 1988, which specifies the kind and seating capacity of the cab, the area in which the cab will operate, and other pertinent information as stipulated by the State Authorities.

Certificate of Fitness

Furthermore, under Section 84 of the Motor Vehicles Act of 1988, every vehicle must have a fitness certificate granted by an Authorized Testing Station. The vehicle must be properly maintained in accordance with the regulations of the Motor Vehicles Act. The cab's speed restriction varies from state to state. Cabs often have a speed restriction of 50 to 65 km/hr. The name & address of the cab driver must be painted or fastened to the vehicle.

All India Tourist Visa

An All India Tourist Permit is necessary if the cab travels from one state to another. After thoroughly examining the application, the All India Permit can be obtained by submitting it to the Transport Authority. The number plate of a cab that has been issued an All India Permit should state that the cab has an All India Tourist Permit. This is because the cab with an All India Transport Permit cannot be utilised for local reasons, i.e. it cannot transport passengers locally.

Drivers, Licenses, and Working Hours

Cab drivers must receive a commercial vehicle driving licence from their state's Regional Transport Office. To earn a commercial driving licence, a cab driver must be at least 18 years old, have finished at least Class 8, received instruction from a Government Motor School, and pass a written and driving test. In addition, a medical certificate indicating the cab driver's physical and mental fitness should also be submitted. The Regional Transport Authority will give the commercial driving licence after examining all of the above considerations and considering the application.

Cab drivers must work the hours specified in the Motor Transport Workers Act of 1961. According to Section 13 of the Motor Transport Workers Act, 1961, an adult motor transport worker may not work more than 8 hours/day or 48 hours per week. Suppose the cab business entails driving long distances, etc. In that case, the employer must seek authorization from the prescribed authorities, with whom the driver may operate for a prolonged amount of time, but not more than ten hours/day & 54 hours/week.

Endnote

To be more specific, if a new startup wants to start a cab business in the country, they must first choose the business structure, then purchase cars suitable for the cab business, acquire permits for the cars (if the cars are to be owned by the company), ensure that the drivers have commercial driving licences for driving cabs, and then enter the cab business. It is recommended that any new endeavour into the cab sector consider Radio cabs, as they are prospering in the market and appear to have a thriving market in the near future.