Bengaluru Cab Driver’s Death Shows Ola, Uber Have More To Fix Than Profits

The financial distress that has befallen India’s cab drivers after the arrival of Ola and Uber saw 32-year-old Pratap, a cab driver with the Karnataka State Tourism Development Corporation (KSTDC), die by self-immolation on Tuesday near the Bengaluru airport.

Not able to pay the EMI on his car loan, worried about the fall in income due to the aggressive pricing strategy of Ola and Uber, but most of all, anguished by the lack of government support in this regard, Pratap took his own life, as reported by various media outlets and eye-witnesses. He succumbed to his injuries on Wednesday, and the news drove his fellow cab drivers to protest at the airport.

Pratap’s struggles typify the experience for cab drivers who have chosen to eschew cab aggregators such as Ola and Uber. Ola launched its services in 2010 and Uber arrived in 2013. Together, both companies have come to dominate a market that was once led by small private taxi companies in select cities, if not just the metros.

The aggressive pricing strategy by these tech platforms for acquiring customers and the lucrative incentives for drivers in the early years meant that both companies managed to drive the kaali-peelis and regular taxis to the fringe.

But Ola and Uber’s typical pricing of INR 8-10 per kilometre, while successful in gaining customers, has also landed them in a soup with their drivers, who spend their time between fares campaigning for better wages and rights on Facebook forums and on the roads for their unions.

The protest launched at Bengaluru’s Kempegowda International Airport after Pratap’s death, against Ola and Uber, saw several drivers affiliated with those two companies also participate in the demonstrations. They may be on the opposite side of Pratap’s ilk, but the grievances are theirs too.

What Are Cab Drivers Demanding?

Tanveer Pasha, president of the Ola, TaxiForSure and Uber (OTU) Drivers’ Union in Bengaluru told Inc42 that an indefinite strike may be on the cards if Ola and Uber fail to guarantee better prices to their drivers.

“At a time when state governments have realised that these are difficult times and have fixed the fares at INR 18 per kilometre for non-AC taxis and INR 24 per kilometre for AC taxis, Ola and Uber are charging just INR 6-10 per kilometre for an AC taxi to capture the market,” said Pasha.

He added that after deducting the cab aggregator’s commission on every ride and the GST surcharge, a driver is able to pocket only 70% of the ride fare.

Last year, the central government in its Motor Vehicle Aggregator Guidelines had mandated that cab aggregators will not be allowed to charge more than 20% of the ride fare as commission. Shaik Salauddin, the national general secretary of the Indian Federation of App-Based Transport Workers (IFAT) had said at the time that the guidelines worked in favour of the cab aggregators, who already charged as much from drivers.

“Our demand has always been a 5-10% commission for cab aggregators. Also, the guidelines don’t have uniform pricing per kilometre, which allows Uber and Ola to drive the prices down for the entire market and cause distress for drivers,” Salauddin had told us.

The last few months have seen cab drivers go on strike in several cities. In Kolkata, drivers are refusing to switch on the air-conditioner in the car to save fuel, much to the chagrin of commuters. Similar incidents have been reported in Delhi and Bengaluru as well. Uber and Ola didn’t respond to queries about this troubling development

The Economics Of Ride-Hailing

It is worth mentioning that what’s happening in India’s ride-hailing market isn’t bereft of economic logic. An earlier era, of small taxi companies and designated taxi stands, was disrupted when Ola and Uber fuelled with venture capital money steamed in, offering cab drivers more rides, better incentives and pay, and improved quality of life overall.

Initially, they delivered on these promises, as cab drivers who migrated to Ola and Uber between 2015-2018 reported a dramatic increase in their earnings, some of them even earning INR 1 lakh per month.

However, as Ola, Uber and Meru Cabs (acquired by Mahindra & Mahindra) continue to turn losses in every financial year, the promises of better incomes they made to drivers are proving to be unsustainable.

Competitive markets drive down prices, goes the economic principle. So to retain their customers, none of the incumbents can independently choose to increase fares for the benefit of drivers, without losing passengers to their competitors. This is how capitalism keeps the wheels of free markets moving. But cab drivers today want more socialism on their plate.

After Pratap’s death, Facebook groups of cab drivers’ unions have been flooded with condolence messages. There are other posts too, celebrating the show of unity by drivers in Bengaluru who’ve chosen to protest at the airport.

Amid the fuel price hike since January, Ola and Uber drivers on a Facebook group have been sharing their trip receipts to highlight their reduced earnings.

Based on a study of several such receipts, Inc42 has been able to decipher that if Ola would pay its drivers roughly INR 8 per kilometre for a ride, it would charge the customer a little over INR 10 per kilometre (discounting the base fare which may be INR 30-35 depending on the distance). The difference would form the company’s commission of around 20%.

Drivers on the group claim that over the last year, their incentives from the company have drastically reduced, while the fall in demand amid the pandemic and increase in out-of-pocket expenses due to the hike in fuel prices has meant that they’re not able to make a good margin on each trip.

Representatives of both Uber and Ola didn’t respond to our queries about falling incomes for drivers.

Reduced Incentives And Lack Of Support Add To Pandemic Blues

It is worth mentioning that Ola and Uber’s daily incentives for their drivers are of the following nature: During peak hours, such as 7 am-11 am or 5 pm-10 pm, a driver in Bengaluru would get a bonus of INR 50 if he manages to complete 4-5 rides, and so on.

The claim of a fall in drivers’ incomes due to a withering of incentives is corroborated in interviews.

Shankar (name changed) said in the past year that he had worked for Uber, the company’s weekly incentives for its drivers had fallen from INR 6,000 to INR 2,000. He claimed that the Uber app, while estimating ride durations, doesn’t take into account the traffic in the city, thus rendering the incentive target unrealistic. For drivers like him who’ve had to pay off leases on their vehicles, a typical workday would stretch for 12-16 hours to make ends meet.

A recent report of the Fairwork Foundation served as a severe indictment of the work conditions for gig workers in India, with Uber ranked at the bottom along with Swiggy and Zomato with a score of 1/10, while Ola tied with Housejoy, BigBasket and Amazon to score 2/10.

The Fairwork report flagged Ola and Uber’s frequent blocking of driver IDs and the poor communications channels offered to them, as one of the most flagrant violations of the principle of fair management.

Is Technology Making Life Difficult For Drivers?

According to Fairwork’s interviews with drivers, the companies’ helpline numbers were mostly either unresponsive or had automated messages playing on loop. Drivers added that ID blocks without warning, based on the complaints of customers were frequent with no documented process for the affected driver to appeal. The ‘blocked’ driver would have to report the block at the platform hub, which meant losing out on daily earnings.

This week, the drivers’ union IFAT has shared the story of Srikanth, who had been driving with Uber for 1.5 years and had a rating of 4.6/5 after completing 1,428 trips. Srikanth returned from a trip to Tirupati with a shaved head but wasn’t able to log in, a fault IFAT has attributed to Uber’s facial recognition algorithm.

“For these past 33 days, Srikanth has been visiting the Uber India office every day and is being met with no response, all without his daily income,” Salauddin of IFAT wrote on Twitter.

In response, an Uber spokesperson said Srikanth’s access to the app had been blocked because he was in violation of the company’s community guidelines. “The driver in question had visited an Uber Partner Seva Kendra when he was unable to log in and it was communicated to him that his access to the app had been removed due to repeated violations of our community guidelines, which set the highest possible safety standards on our platform.”

Despite repeated requests, the Uber spokesperson didn’t disclose the exact provision of Uber’s community guidelines which Srikanth had allegedly violated. Srikanth, on the other hand, has told the media that upon visiting the Uber office, he was told that he had been blocked because of ‘multiple login attempts’.

The spokesperson claimed that Uber’s facial recognition tool is capable of detecting natural changes in a person’s appearance such as long or cropped hair. “In case drivers face a problem logging in due to any technical issue with the selfie verification process, they have the option to visit the nearest Uber Partner Seva Kendra for a manual review of their profile.”

As pointed out by Balaji Parthasarathy, lead investigator of Fairwork’s study on gig workers in India, drivers claiming to have been wrongfully locked out of the app is a common complaint, besides reduced pay. “A decline in daily trips, incentives and a per-kilometre rate that was often below state-mandated rates meant a steep decline in earnings even before the pandemic and lockdowns took hold,” Parthasarathy told Inc42.

“The second concern that workers had in unison was that the driver support helplines were often unresponsive. They were provided with automated messages that did not adequately resolve their grievances whether this be with the fare of a particular ride, problems with passengers, getting wrongfully locked out of the app due to facial recognition error, etc,” the Fairwork investigator added about the complaints that drivers have.

Can The Mess Be Fixed?

To be fair, all is not bad with Ola and Uber. In fact, the presence of ride-hailing apps is essential for making growing metropolises liveable. Because for companies such as Ola and Uber, growth would mean more drivers on the road, at all times of the day, serving most locations in a city. This ensures ease of access for the customer, who once had to rely on taxi stands and on the goodwill of drivers, who would very often decline trips in the night or when it rained. Ride-hailing companies ensure this with dynamic pricing, which compensates drivers for completing trips in difficult circumstances.

In contrast, traditional cabs, in their heyday, would depend on taxi stands or areas such as airports and railway stations, thus often leaving the suburbs or the ‘less profitable’ areas unserviced.

So where exactly have things gone wrong?

According to Parthasarathy, workers’ complaints with Uber aren’t unique to India. “Uber’s business model incorporates piece-work, a shifting of costs associated with assets — in this case, car and fuel — on to workers, and cash-burn to generate network-effects. These are features seen in many countries. When VC backed firms are forced to focus on profitability, incentives for both workers and consumers reduce and this results in a substantial reduction in earnings.”

A couple of days after Pratap’s suicide, the Karnataka government, taking cognisance of cab drivers’ agitations in the city, fixed a new and seemingly better price structure for cab aggregators and taxi operators, effective from April 1, 2021. The drivers too have called off their plans for an indefinite strike, at least for a while, as authorities have assured that their pending issues with fares will be resolved by Monday. Evidently, concerted action by drivers’ unions and the intervention of government authorities is the need of the hour.

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