Why supporting Uber in the quarrel with Delhi Govt is a mistake
Over the last few days, there has been a furious debate raging over the issue of Delhi Govt ban on surge pricing and how the socialist AAP govt is attempting to protect their vote bank (presumably auto rickshaw drivers) by scuttling innovation that App based taxi services like Uber has brought in. While there is no denying that app-based services are a god-send and have not just brought in innovation but also convenience for both taxi drivers (so-called Uber partners) as well as the consumers but it’ll be a mistake to blindly trust what Uber is telling us and even a cursory glance at the facts will prove most of the claims made by Uber to be a stretch, if not completely untrue. I have attempted to answer some of the most common questions being raised on social media.
Banning surge outright is not right.
This might come as a surprise to a few people but the Delhi Govt has not banned Surge Pricing despite what TOI, HT and others will have you believe. They has just asked the commercial cars (Uber partners) to comply with the State Transport Authority, Delhi notification of May 2013. The notification has designated per km charges for taxis and autos — the reason all commercial vehicles have a govt approved meter.
According to the charges allowed under the notification, Uber can still charge about 2–2.5X depending on type of cabs, due to their low fares subsidized by VC money.
If that’s the case, Why has Uber suspended the surge pricing
This is where it gets interesting –Uber has voluntarily suspended surge pricing for all its partners till further notice for no discernible reason. It is difficult to believe that they could not alter their algorithm to add a ceiling that would have ensured compliance with the govt notification.
The Free Market Argument
The free market logic doesn’t work in this case because Uber is funded by VC from countries where the rate of capital is 1–2% and compete with kaali peelis for whom the rate is much higher. This is much worse than Walmart vs Mom & Pop stores case where economies of scale come into play.
Surge Price algorithm
Uber CLAIMS that the surge pricing is a function of demand-supply. There is no way to prove/ disprove it. As most frequent users would attest, the surge seems to have a manual on-off switch and seems to be arbitrary on a few occasions.
Well then if that’s the logic why only during odd even
The notification allows enough elbowroom for Uber to charge about 2X-3X surge — That’s the reason it wasnt an issue earlier. However during the odd-even period, once demand started increasing the surge went up to 5–6X, making it not only immoral but also illegal. But rather than apologising, Uber did what they always do in such situations — play victim and blame the govt.
Uberpartners have private vehicles and are not under the ambit of the Delhi govt notification
This is a misconception. There are primarily three types of vehicles and can be identified through their number plates –
1. Black on white — Privately owned vehicles
2. Black on yellow — Commercial Vehicles
3. Yellow on Black — Self drive vehicles.
All UberPartner vehicles are commercial vehicles that are required to comply with the notification. That is the reason the traffic cops are able to impound these vehicles under the notification.
In Conclusion, Uber does not have an argument in this case, besides “we are a cool startup — and govt should have no say in what we do.” What makes the situation interesting is that Uber’s Indian competitor Ola, suspended surge pricing on its app within 24 hours of the directions from the Delhi Govt and is encouraging people to book Ola Share rides. Ola is also offering free rides on Ola Shuttle. Whether this will put further pressure on Uber in this quarrel with the Delhi govt, remains to be seen. But one thing can be said for certain — Ki picture abhi baaki hai.