India backs new ride-hailing service to challenge likes of Uber

NEW DELHI, Feb 24 (Reuters) - A new Indian taxi service, backed by the federal government, will give drivers a share of profits from the business and charge no commissions, mounting a direct challenge to American giant Uber UBER.N in the world's most populous nation.

Amit Shah, India's minister of cooperation and also its home minister, addressed drivers at an event late on Monday and said the service would work under a so-called cooperative model where drivers can pay 500 rupees ($5.5) to become shareholders and get a share of the profits three years later.

"The aim of the taxi service is not to operate as a company and make profits," Shah said.

The government-backed initiative comes amid growing complaints by drivers of Uber and local rival Ola in India about excessive charges, low fares and high commissions.

When Shah first talked about the plans last year, he told the Indian parliament that the new taxi service would be like Ola and Uber but "its profits will not go to any tycoon."

Uber said in a statement that India's mobility ecosystem was dynamic and rapidly evolving, and "healthy competition ultimately benefits all," adding that it remained the preferred platform for both drivers and riders.

Ola did not respond to Reuters queries.

FROM CABS TO BIKES

Uber and domestic businesses Ola and Rapido still dominate India's ride-hailing market, offering their services across hundreds of towns and cities. Grand View Research says the $2 billion market will grow to $11 billion by 2033.

Previous attempts by smaller private rivals like BluSmart have failed to hit the dominance of Uber, but there has not been any federal government-backed challenger so far in India.

Shah said more than 250,000 drivers had joined Bharat Taxi, where customers can book cabs via a mobile app. Currently available only in a handful of states, including New Delhi, the government plans to take the service countrywide within two years.

Customers can also book three-wheeled autorickshaws and scooters or motorcycles on the Bharat Taxi app, an offering that is similar to rival Uber.

"Bharat Taxi will also mortgage your taxi and help you get a loan for it," Shah said.