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The Uber Trap

After promises of high earnings, fare cuts and higher commission have left drivers with car loans they can’t pay off

A few years back, the skyline of Bangalore was dotted with hoardings of On-demand taxi services calling for drivers. Both Ola and Uber practically hijacked the ad spaces in the city and suburbs, offering earning commitments that were previously unheard of, for taxi drivers. Soon, there were long queues at registration kiosks, with even graduates signing up to be a driver, and taking a loan to procure a car, to add to the large supply side inventory of these taxi aggregators. Today, most of these stories are sour tales of folks trying to barely make their ends meet.

A Uber ad hoarding calling for drivers.

Uber entered the Indian market in 2013. Many poor, semi-literate youngsters left their jobs to join up, taking out a loan for a car, and expecting to significantly increase their earning potential. “They gave us the impression that the sky was the limit in terms of money. They said what we earned all depended on us. I was told by an Uber agent that some drivers were earning up to 90,000 rupees a month,” said a driver.

The drivers on joining become a “driver-partner”, in Uber parlance. In early 2016, most drivers were able to work about 10 hours a day and earn enough to manage their monthly installment on the car loan, the cost of fuel and maintenance, and enjoy savings of around 50,000 rupees – an astronomical sum for any Indian driver.

The crash, when it came at the end of 2016, was brutal.

“Uber reduced the rate per km charged to passengers from 10 rupees to just six rupees. We used to get an incentive of 2,000 rupees every day once we had completed a dozen rides. This was cut back to just once a week for doing 40-50 rides. And they hiked their commission from 20% to 25%,” says New Delhi Uber driver Naresh Kumar.

But the rides haven’t got cheaper either. Indian passengers who were once thrilled with the low fares, are now looking more and more at the “share” ride option, a car pooled alternative that costs much less than a individual taxi booking.

Yet these rates do not reach the drivers. The higher commissions – along with the other measures – are a disaster for drivers. They cannot reduce the size of their monthly car repayments. Those who want to sell the car and get out cannot do so as the resale value won’t be enough to repay the loan. And while the ride rates have fallen, the price of petrol and diesel have gone up.

“They are locked into a form of bondage,” says Gautam Mody, secretary of the New Trade Union Initiative, a relatively new national organisation. While many drivers angrily accuse Uber of making false promises, even “guarantees” about income, Mody concedes it is probably unlikely that the San Francisco-based company promised specific numbers in its advertising. What isn’t known is how its agents projected the work.

And the fundamental point, in any case, says Mody, is that Indian drivers with barely an education but a strong desire to support their families are vulnerable when anyone promises them a better life. “The fact is that Uber created a perception that spread by word of mouth. I know not just of drivers who left OK jobs, but of office employees – lower level accountants and bank clerks – who left their jobs to earn better money as Uber drivers,” says Mody.

Sunil Borkar, head of a Mumbai union that represents Uber drivers, says drivers had been lured into working for the company with big promises and then left high and dry after Uber changed the terms.

Now they are saddled with car loans they can’t pay off. Some are desperate – breaking their backs and just breaking even, if that. There is no exit for them,” says Borkar.

Borkar says that Uber and Ola officials have refused to meet union representatives. He wants the Mumbai authorities and those in other states to force the two companies to increase the fares by between 25% and 50%.

Ola too is seeing a similar trend in Bangalore, with driver dissatisfaction riding high.

An Uber spokesman said: “Over the past two years, as the popularity of our service has increased, we have moved from a startup mode to a more sustainable business model and started to reduce higher levels of incentives while investing more in drivers and our products for the long term. Hence, while driver incentives across India have tapered from the 2016 levels, earnings have largely remained sustainable and consistent over the past several months.”

“We keep experimenting with our incentive structures, which may differ from city to city and can vary between one driver partner to another, based on the kind of incentive structures they opt for. That said, we are focused on ensuring that offering trips through the Uber App remain attractive. Driver earnings across India have largely remained sustainable and consistent over the last year.”

The spokesman acknowledged that recent fuel price increases have impacted earnings, and said the company had introduced a mechanism to ensure driver earnings across India correlate with changes in the price of fuel. The mechanism has been rolled out in Mumbai.

He added that Uber is also “working towards providing driver partners access to health insurance, life insurance and micro loans and a host of other benefits aimed at improving their welfare”.


The Guardian

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