At the beginning of 2016, Delhi’s government launched an ambitious initiative to rein in the city's runaway pollution, ordering nearly half of Delhi’s private vehicles off the road each weekday. The "odd-even scheme" had a lower impact than expected on air quality, though it predictably eased Delhi’s gridlock. Now the decree has been reinstated, and I can’t see why. The idea was premised on reducing pollution. Without that anchor, its only rationale is the perceived popularity of the first run. Frustrating as traffic jams are, they do not constitute an existential threat, and their abatement cannot justify placing a substantial daily burden on tens of thousands of commuters and a denial of livelihood to employees of car rental services.
Delhi’s Chief Minister Arvind Kejriwal has admitted that odd-even cannot be made permanent in the absence of a robust public transport system, and yet is considering enforcing it for two weeks every month. If it doesn’t make sense to apply a policy for 30 days a month, I don’t see how it can make sense to do it for half that time.
Delhi’s car owners, having neither the option of driving their own vehicles nor an adequate public replacement, have turned increasingly to app-based taxi services like Uber and Ola. These firms see a welcome spurt in demand, but it is coupled with a shortage of cabs, because odd-even takes off the road half their employees, or driver partners as they prefer to call them. Their automatic response has been to raise rates, much like airlines do when seats fill up, and multiplexes do on weekends in anticipation of more customers. The mechanism used by Uber and its clones is called surge pricing, supposedly an automatic matching of supply and demand. Since Uber’s drivers set their own work hours, the company argues surge pricing provides drivers greater incentive to ply their trade, and shortens wait times for customers. This study indicates the idea works efficiently in the United States, which is by far Uber’s most lucrative market at the moment.
Complaints and court action
In India, dynamic pricing models are deeply unpopular, even though the businesses that use them provide comfortable taxi rides at reasonable rates most of the time, and air fares competitive with trains on many routes. The occasional exorbitant fare immediately brings in its wake not only bitter complaints but legal challenges. It’s like demanding a pet dog that never barks at night or bares its fangs.
And so it is that a petitioner has taken the surge pricing issue to court, and judges have questioned the government about it, and Delhi’s populist administration has admonished taxi firms. In all of this, I am on the side of taxi services against the petitioner, the High Court (which admittedly has not yet taken a stand) and the Delhi state government.
I happen to be a frequent user of app cabs. In 2015, according to an email I received from Uber, I completed 270 trips, spent 7,831 minutes inside the company’s cabs, and covered 2,650 kilometers in the process. Add to these figures a few dozen trips on Uber’s rival Ola, which I use when Ubers are in short supply or in Uberless cities like Jodhpur. I wrote a column defending Uber after one of its drivers raped a passenger, and another largely appreciative piece when Bombay’s cabs and autos went off the road in protest against the app-incursion.
Neither of those articles tackled the most contentious aspect of Uber and Ola’s revenue model, surge pricing. I can understand the anger at hiked rates because I’ve felt it often enough. Moreover, I believe Uber has more control over surges than it reveals, and that the people in charge can not only turn a surge on and off, but also tweak it at will. There was a period of almost a month in the middle of 2015 when the surge was on every day virtually through the day, for no discernible reason. Perhaps the company was checking how resilient demand was at different times.
That said, anybody put off by surge pricing can simply opt not to order the cab. It’s not as if Uber forces anybody to use their service. When my screen shows a high price multiple, I settle for a yellow and black taxi cab, and I don’t see why other people cannot. After all, what were our options before 2014? The entry of Uber hasn’t cut off any of those.
It would be different if Uber and Ola formed a cartel, drove out all competition through price cutting and then raised their prices dramatically. Not only has this not happened, I don’t believe it can happen in any online space. Barriers to entry are too low to allow price gouging, and anti-trust laws too strong.
Since app-based providers aren’t monopolies, complaining about prices on Uber and Ola is like complaining about the price of Häagen-Dazs ice cream. You can always buy Baskin Robbins, or Kwality, or some other brand, right? Well, then, take an auto rickshaw, or a bus, or walk to the nearest train station. And if you have to grumble, grumble about the Delhi government’s irrational and ill thought-out policy rather than Uber and Ola’s perfectly rational response.