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Ola, Uber drivers' strike: 5 reasons why cab fares may increase drastically

The ongoing strike by the driver unions across the nation has caused enough ripples but not enough to change their plight.

Danny D'Cruze | February 13, 2017 | Updated 18:00 IST
Ola, Uber drivers' strike: 5 reasons why cab fares may increase further

 The ongoing strike by the driver unions across the nation has caused enough ripples but not enough to change their plight. The driver unions like Sarvodaya Driver Association of Delhi (SDAD), which claims to represent about 1.5 lakh drivers, have decided to partially carry on with the strike till their demands have been met by popular cab aggregators, Ola and Uber.

Customers, meanwhile, have been finding it difficult to book cabs through these apps as very few drivers are on the street. Buses and the Delhi metro have been more crowded than usual with more people resorting to public transport. The situation is unlikely to resolve soon as the cab aggregators have not given any indication to address the drivers' issues and meet their demands.

At the heart of the issue is a fundamental disconnect between what the drivers are demanding and what the cab aggregators are trying to achieve. Despite the tussle between these two sides, the rider or the consumer will ultimately be the one to bear the brunt of whatever lies ahead.

Here are six reasons why your cabs are going to cost you much more:

Reduced incentives: In the beginning, when the taxi-app trend was setting in, cab aggregators paid out more than double of the actual earnings, for example, if a driver completed trips worth Rs 1,500, the companies paid out Rs 3,000 from their own pockets. These incentives often exceeded the actual earnings. The tremendous pay led to a chain reaction where one driver soon invited his relatives or friends to join, leading to a high number of drivers and more people making a switch in career. This led to our second problem.

Mismatch between demand and supply: Once the aggregators attached a decent number of drivers to their network, they reduced the incentives. So much so, that the drivers have to compensate with extra hours, reducing drivers' quality of life and ultimately endangering the rider's safety as well.
Earlier, drivers had to put in an average of 10-12 hours of work a day yielding around Rs 5000 a day which resulted in ample amount of money even after subtracting the loan amount for the car. With lower incentives for higher thresholds, the drivers started working far more than their previous working hours. This in turn threatens their mental and physical health.

Flawed business model: Companies like Ola and Uber are heavily reliant on the capital raising model where the company focuses more on acquiring capital in the form of funds in return for shares in equity. The business model thrives because of the subsidies offered to both, drivers and riders. These investors are now demanding a stable, profit-generating business model. To achieve that, the companies have to either substantially shave-off the earnings of the driver or add to the existing ride-fares. The choice is clear which has led to numerous strikes from driver unions.

Bigger cut: The need to show a profit generating model also requires a bigger cut from the earning of the drivers. This cut is currently set around twenty percent for both, which according to the drivers is an exorbitant amount for them to pay. They have currently demanded the government to interfere and have asked them to reduce the cut substantially.

Low fare per kilometer: Despite the strikes, the companies are avoiding a major hike in prices for the rider. The basic fare still ranges around Rs 6 to Rs 8 per km. Since incentives are no longer that appealing, the drivers are demanding for the fares to be hiked to as high as Rs 21. If the strike continues, the companies will be left with no other option but to increase the fares.

 

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