Ride-sharing services in Nepal, primarily represented by platforms like Pathao and Tootle, have undergone significant legal and regulatory transformations over recent years. These changes driven by legal challenges, court rulings, and amendments to existing laws, highlight the complexities of integrating innovative digital services into traditional regulatory frameworks.

The Initial Legal Framework: Restrictions on Private Vehicles

Before the landmark decision by the Patan High Court and subsequent provincial amendments, the Motor Vehicles and Transport Management Act, 2049, imposed strict limitations on the use of private vehicles for transportation services. Section 8 of the Act specifically prohibited private vehicles from engaging in commercial transport activities, mandating registration solely for personal use. The law defined “transport service” as the conveyance of passengers or goods for compensation, a function that was reserved exclusively for public vehicles.

The intention behind this restriction was to ensure public safety and preserve the integrity of the public transportation system. By preventing private vehicles from providing transport services, the law aimed to safeguard consumers from potential risks posed by unregulated commercial transport and ensure a stable, safe, and accessible public transport infrastructure.

Patan High Court’s Ruling: A Shift Toward Digital Services

The legal landscape underwent a significant shift following the Patan High Court’s ruling in the case of the Taxi Driver’s Association versus Pathao and Tootle (Decision Number: 076-WO-0392) made on 29 Magh 2076. The appellants argued that these ride sharing platforms violated Section 8 of the Motor Vehicles and Transport Management Act by enabling private vehicles to operate as public transport. The High Court, however, disagreed, reasoning that:

• Role as Digital Service Providers: Pathao and Tootle serve as digital platforms connecting riders and passengers. Their primary role is facilitating these connections, not directly providing transportation services.
• Non-Ownership of Vehicles: The platforms do not own the vehicles used; these are independently registered by private individuals.
• Alignment with Policy Frameworks: The operations of these platforms were seen as consistent with Nepal’s Information Technology Policy, 2072 and the Foreign Investment Policy, 2011.
• Expansion of the Ride-Sharing Economy: Highlighting the growing industry, these platforms have potential to create jobs and aligns with global trends in mobility solutions.
• Consumer Rights and Economic Liberalization: By offering affordable and efficient services, these platforms empower consumers and contribute to a mixed economy, as envisioned in Nepal’s Constitution.

The court’s ruling marked a turning point for ride-sharing services, effectively legitimizing their operations in Nepal. It also issued a mandamus order to the government for the development of a regulatory framework to address technological innovations in transportation.

Provincial Legal Amendments: A Decentralized Approach

Following the High Court’s decision, several provinces amended their laws to accommodate ride-sharing services. While the federal law continues to prohibit private vehicles from offering commercial transport services, some provincial governments, including Bagmati Pradesh, Gandaki Pradesh, and Sudurpaschim Pradesh, introduced amendments to their respective Provincial Motor Vehicles and Transport Management Acts. These amendments created exceptions for ride-sharing platforms, permitting private vehicles to operate under specific conditions, including prescribing fair rates, insuring passenger etc.  

Official Recognition: Ride-Sharing as a Service-Oriented Industry

In a further step towards formalizing the sector, the Ministry of Industry, Commerce, and Supplies of Nepal issued a notice in the Nepal Gazette on 18 Magh 2080. This notification amended Schedule 8 of the Industrial Enterprise Act, 2020, officially classifying “Ride Sharing Service” as a service-oriented industry. This regulatory change provides a legal framework that facilitates the growth of the ride-sharing sector by acknowledging it as a recognized industry within Nepal’s economic structure.

Formulation of a New Guideline

As the ride-sharing industry continues to expand, the Nepalese government is in the process of developing a comprehensive regulatory framework. The proposed Ride-Sharing Guidelines are designed to address critical aspects of the sector, ranging from registration and safety standards to fare structures and complaint management. Key provisions of the proposed guidelines include:

1. Registration of Vehicles: Motorcycles and scooters used for ride-sharing must be registered as public vehicles.
2. Licensing of Platform Providers: Ride-sharing platform providers must be officially registered with the Transport Office and obtain the necessary licenses.
3. Safety Requirements: Vehicles used for ride-sharing must be equipped with essential safety features, such as odometers, safety barriers, hand grips, and either anti-lock braking systems (ABS) or combined braking systems.
4. Passenger Data Security: Platforms must ensure that passenger data is securely stored and made accessible to authorities when required.
5. Service Area and Surge Pricing: The service area for ride-sharing will be limited to a 15 km radius from the point of departure, and surge pricing will be allowed during periods of high demand.
6. Insurance and Liability: Comprehensive insurance will be mandatory for vehicles, drivers, passengers, and third parties to cover potential risks.
7. Driver Training and Ratings: A driver rating system will be implemented, with mandatory refresher training for drivers with low ratings.
8. Safety Gear and Passenger Limits: Passengers will be required to wear helmets, and only one passenger will be permitted per motorcycle or scooter, with children below 10 prohibited from using the service.
9. 24/7 Customer Support: Ride-sharing platforms must establish 24-hour help and complaint centers to address passenger concerns promptly. Passengers will have the option to file complaints with the police in cases of drivers misconduct.

These proposed provisions aim to ensure that the ride-sharing industry operates in a safe, accountable, and transparent manner, aligning with both consumer protection and the evolving demands of the market.

Conclusion: Moving Towards a Structured and Sustainable Ride-Sharing Sector

The ride-sharing sector in Nepal, exemplified by platforms like Pathao and Tootle, has revolutionized urban mobility, providing convenient, cost-effective transportation options. However, integrating these platforms into the country’s legal and regulatory framework is still a work in progress. The ongoing efforts to develop comprehensive guideline and harmonize federal and provincial laws reflect Nepal’s commitment to embracing digital transformation while safeguarding public interest.

Disclaimer: This note is provided solely for general information and does not constitute legal opinion. For specific legal query, please seek professional counsel.