By Advait Moharir
New Delhi has been in a constant state of unrest for the last few days due to the ongoing strike being carried out by drivers of the app-based cab corporations-mainly Ola and Uber.
The strike has thrown normal life out of gear as throngs of employees hit the street protesting against reduced incomes and the rollback on incentives.
The cab companies devastated by the strike have officially requested the drivers to maintain peace and continue the services. However, questions arise, what is the reason behind this strike? Are the income cuts implemented by the companies justified? It is essential to examine both the parties claims to find valid answers to these pertinent questions.
Uber and Ola made life for regular commuters much easier. | Photo Courtesy: Laughing JawanThe app-based taxi market: Then and now
The app-based cab system is the brainchild of Indias startup revolution. The system operated in a way that it required taxi and cab drivers across the country to register with Ola or Uber.
[su_pullquote]Earlier, the policies were driver-friendly as companies were recruiting workers to kick-start operations.[/su_pullquote]
Earlier, the policies were driver-friendly as companies were recruiting workers to kick-start operations. The turnout was high owing to the attractive policies which included high wages, easy car registration, and flexible work timing. Average incomes were significantly high, sometimes touching the one lakh mark and maintenance costs were modest, ensuring comfortable revenue.
There were fixed targets and exceeding those ensured that one got incentives and bonuses. However, the system evolved to become more user-friendly. These companies lowered fares significantly to generate high demand, create a loyal customer base, and capture the market.Since there were a limited number of players in the market, all companies had to rely on advertising and discounts to differentiate their product.
This led to a significant rise in costs-eventually companies like Ola ran into losses to the tune of INR 796 crore in FY 2015.
In order to keep prices low, incentives were reduced and wages were cut. Recurring maintenance costs and depreciation reduced net income received by the drivers.
New customer friendly policies like Ola Share and Uberpool have reduced revenue as the fare is split, and the consummate benefit to the driver is even less. The new strategies also lead to a reduction in the number of bookings per driver, and since drivers are paid according to the number of rides per day, their earnings took a massive hit. The sudden turnaround in conditions created great hardships for drivers and this frustration has manifested in the form of the current strikes.
The companies’ defence
In all fairness, the cab companies aren’t entirely at fault. It is clear that Uber and Ola have provided for the drivers to the best of their capacity. Perks like accident insurance and bonuses still remain despite both corporations running into losses. The fact of the matter is that when earnings were high, cab drivers parked more than 2-3 vehicles with these corporations instead of one, to invest more and earn more. However, this created a high pool of vehicles in Ola and Ubers inventory. It is near impossible for a company to continue running at such high operating costs. In India, it is impossible for a company to sustain in the long run without being consumer friendly.
Uber’s controversies have been long drawn. Last year, a student from Miranda House succumbed to her injuries from an accident caused by a drunk Uber driver. | Photo Courtesy: YoutubeThe impact of the unavoidable shift
The decision to shift to a model that offers consumers lower fares was inevitable, as that differentiates the product from other taxis and auto-rickshaws. This shift is a huge one, and it will come at the expense of the drivers for some time.
Ola and Ubers strategy of creating a solid support base is working; many commuters depend on it on a daily basis, and much more are shifting.
Thus, once this customer base is built, there will be a steady price hike, as the company will focus on consolidating profits, which will lead to the benefit the drivers. So, while the opportunity cost of this model is quite high, it is a risk worth taking for long term stability.
The current scenario
The Delhi Government tried to initiate talks between the sparring parties. However, there is no progress as neither side are willing to concede their position. The strike even took a violent turn with the burning of a cab by an aggressive faction of protestors.
[su_pullquote align=”right”]While the strike is still officially on, it is clear that it is failing as the status quo is not changing in any way.[/su_pullquote]
However, the High Court has rapped the unions stating that negotiations are possible only in a manner of peaceful engagement. Also, the strike in Delhi has come to an end with cabs back on the roads, as the drivers were growing tired of the deadlock and their salary at stake. While the strike is still officially on, it is clear that it is failing as the status quo is not changing in any way.
Things are thus slowly returning to normal. However, the court has summoned both parties for a hearing on 28th February, and till then the fate of both the drivers and the cab companies hangs in uncertainty.