Drivers of cab aggregators Ola and Uber in major Indian cities like Mumbai, Delhi, Bengaluru, Pune and Hyderabad, are on an indefinite strike. For office-going commuters who use this on-demand cab service, especially in Mumbai, this has become a real source of inconvenience.
For 1.5 million drivers on this app-based cab services, the past two years have been especially hard. They have taken flak from aggrieved conventional taxi drivers, dealt with government policy against surge pricing and protested against lower monthly incomes and reduction in incentives offered by Ola and Uber. Those drivers who took massive loans to buy cars are struggling to service them, with some even committing suicide. Their (drivers) pain is real.
What are the latest round of demands presented by these cab drivers? Are these legitimate demands, and can cab aggregators or regulators do something about them?
— Vijay Pandey (@vijayrpandey) March 19, 2018
“Ola and Uber had given big assurances to the drivers, but today they are unable to cover their costs. They have invested Rs 5-7 lakh and were expecting to make Rs 1.5 lakh a month but are unable to even make half of this, owing to mismanagement by these companies,” said Sanjay Naik of the Maharashtra Navnirman Vahatuk Sena, to the Press Trust of India.
Naik goes onto articulate that this problem particularly affects those drivers who had received loan guarantee letters from Ola and Uber to finance the purchase of their cars through the MUDRA scheme without any verification requirements.
These drivers are now defaulting on their loan repayment since they are unable to cover their costs with incentives offered by the app-based cab services at an all-time low, and thus reducing their income by nearly half in certain cases. In fact, a few banks have already begun to pull back on car loans to them and tweak underwriting norms.
What position has Uber and Ola taken to address lower incomes and incentives for drivers? “As a two-sided market, we reached a tipping point in India, where sustained high demand from riders and drivers allows us to begin reducing higher levels of incentives for drivers and discounts for riders, to operate more efficiently,” said the Uber spokesperson to Factor Daily.
This is a consequence of both Ola and Uber taking cognisance of market realities. Subsidised fares for customers and massive financial incentives to drivers were largely sponsored by money flowing in from the pockets of venture capitalists, while the startups themselves didn’t make much money. Forget making money, Ola suffered losses of approximately Rs 2,313 crore in the financial year 2016.
Evidently, this dynamic is just unsustainable, forcing Ola and Uber to make radical changes. “A source close to Ola said incentives are only one of the components of overall driver earnings. The cab-hailing company has rolled out other programmes to maximise utilisation. This is a function of overall ride time to the total time spent by a driver partner on our platform – it has increased significantly. This had led to an increase in overall earnings for driver partners,” the Factor Daily copy goes onto add. In other words, the app-based cab services are arguing that with the rise in customer demand, drivers are earning enough through their rides. Therefore, they do not need any further incentives. By some indicators, the number of daily rides rose by 60% in 2017 from the previous year. However, the protesting drivers are evidently not on the same page.
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“Ola and Uber had shown the dream of a monthly income of Rs1.25 lakh, but now they are barely getting Rs 20,000 to Rs 30,000, making it difficult for the drivers to run the show,” added Naik. “One of our main demands is that Ola and Uber should ensure that drivers receive at least Rs 1.25 lakh monthly business, a promise made in the beginning.” Is this feasible in a market where there is now a glut of driver and cabs, and app-based cab services are realigning their businesses to ensure some semblance of profitability?
Not only is it less money to take back home, in certain cases drivers are unable to service their loans. Considering this wide discrepancy between drivers and the companies, the State government will have to intervene as a neutral third party. In Karnataka, for example, authorities had set up a new fare structure and the tariffs charged by these cab-hailing services rose accordingly.
With better per kilometre rates (approximately Rs 15-16 per km), things have improved to some extent, but many are seeking a reduction in commissions up to 25-30% they pay to these cab aggregators to 10%.
Another major point of protest is the alleged preference Ola and Uber have given to company-owned cars under their financing schemes over driver-operated vehicles. It’s hard to defend these app-based companies for this discriminatory practice. Starving driver-owned vehicles of business only because they refused to avail of loans from the mother company is unfair.
Other demands include determining fares based on the cost of the vehicle, bringing an end to low-fare bookings and reinstating drivers who were blacklisted after commuters had given them low ratings, among others. Some of these demands seem reasonable, while others like reinstating blacklisted drivers seem out of sync with the very rationale of having a rating system in the first place.
The proliferation of app-based cab services is down to the government’s inability to fix the public transport system which assures last-mile connectivity. Both the Centre and State government are yet to come up with clear policy regulations governing these app-based cab services. Without any clarity, issues pertaining to surge pricing, compulsory CNG usage, permit-related concerns, better benefits, accident insurance, minimum wage and relaxation in working hours, among others, will continue to create conflict between drivers, customers and app-based cab services.
Their (Ola and Uber drivers) previous experience with a strike does not bode well for the current one. The bottom line is that many of them can’t stay off the road for more than an extended period since they don’t earn a fixed salary. To pay off their urgent expenses, they have to come back. Having said that, it’s time authorities really took cognisance of their problems and ensure that these drivers do not suffer.