The Aakhya Weekly #109 | Wheeling Through India’s App-Based Mobility Ecosystem
The Aakhya Weekly #109 | Wheeling Through India’s App-Based Mobility Ecosystem
In Focus: Riding the App Revolution
By Yashvika Malhan
In a nation where national and state governments scramble to keep pace with rapid technological advancements, the rise of app-based mobility aggregators is a case in point. Nearly a decade ago, ride-hailing apps burst onto the scene, dramatically upending India’s traditional taxi service model and sparking a transformative shift in urban transportation. What started as a duopoly with global giant Uber and Indian startup Ola, is now teeming with numerous startups carving out their niches—names like Rapido, InDrive, and Blue Smart come to mind. These ride-hailing platform apps have expanded beyond cabs to include autos, becoming a crucial revenue stream post-pandemic, and bike taxis, adding another layer of complexity to an already dynamic sector.
Regulating the Ride
After operating in a regulatory grey area in India for a while, the ride-hailing industry came into sharp focus in December 2014 when a cab driver allegedly sexually assaulted a commuter in New Delhi. The accused, a repeat offender driving without a license, highlighted the urgent need for stringent regulations. This incident prompted a revision of the Radio Taxi Scheme, mandating that all cab aggregators must have an operating permit. It also imposed restrictions on hiring drivers with a criminal record within the past seven years. By 2016, the Ministry of Road Transport and Highways (MoRTH) introduced comprehensive guidelines detailing vehicle, driver, operator, and licensing requirements. These guidelines prompted states to draft city taxi rules. However, aggregators quickly challenged these ‘regressive regulations’ in court, launching online petitions against their ‘burdensome’ nature.
In December 2020, MoRTH released new guidelines under the Motor Vehicles (Amendment) Act, 2019. These guidelines sought to regulate aggregators, defined as “digital intermediaries or marketplaces for passengers to connect with drivers for transportation,” aiming to reduce traffic congestion and pollution.
Over the years for the mobility aggregators, the concerns have evolved beyond commuter safety. Now, the industry grapples with complex issues like pricing strategies, the rights and conditions of gig workers, and compliance requirements for cleaner mobility. The legality of bike taxis, mired in confusion for years, found some clarity only recently, further illustrating the ever-shifting sands of this regulatory terrain.
The ‘Fair’ Fare Play
Ride-hailing companies use base rates, estimated time, distance, and dynamic pricing to set fares. To streamline this, the 2020 MoRTH guidelines introduced key regulations to standardise pricing. Here’s a breakdown: Surge pricing is capped at 1.5 times the base fare, while the minimum fare can be reduced to 50% below this base rate. Aggregators are restricted to taking up to 20% of the total fare, ensuring drivers receive 80%. Cancellation charges are limited to 10% of the fare or 100 INR, whichever is lower. These measures were intended to balance the interests of consumers and service providers while curbing excessive pricing.
Since transportation is a state subject under the Seventh Schedule, state governments have introduced their restrictions, further complicating the regulatory landscape. Take Karnataka’s February 2024 Motor Vehicle Aggregators directive, for example. It mandated uniform fare structures for all cabs, treating app-based services like Ola and Uber the same as traditional city taxis. This approach ignores the unique value of app-based services, such as dynamic pricing and real-time tracking. Instead of leveraging these innovations, the directive risks flattening the market, stripping away the competitive advantages of app-based platforms. As Anupam Mannur, a public policy commentator, points out:
If price controls (placing limits within which the price can move) were bad enough in distorting the market mechanism, fixing prices is many shades worse? Market shortages and excesses are likely, as price signals no longer work. There is no incentive for drivers to go through peak hour traffic or unfavourable weather conditions when the compensation is the same as in normal conditions.
Surge pricing, which often leads to steep fares, is a persistent global issue, including in India. MoRTH has expressed concerns about the risks of unregulated surge pricing potentially exploiting consumers, particularly during emergencies. There are inconsistencies between the surge amounts charged to riders and those reported to drivers, suggesting that cab aggregators might retain a portion of the surge revenue. To tackle this, improved transparency is crucial. This involves clarifying how surge pricing is calculated and how revenue is split between drivers and aggregators. Such clarity is essential for drivers and riders to fully understand the total fare and its breakdown—an information asymmetry noted in the 2022 CCI survey.
Gig Economy Gearshift
Cab aggregators engage drivers as gig workers through a platform-based model, allowing drivers to choose their working hours and the number of rides they take, offering flexibility. However, this flexibility comes with significant trade-offs. Regulations introduced in 2020 require cab aggregators to provide drivers with health insurance, life insurance, and adequate training. Despite these rules, consistency in terms of compliance seems lacking. For instance, the Pune RTO in March 2024 rejected aggregator licensing applications from companies like Ola and Uber due to the aggregator’s lack of compliance with this provision. Over the years, drivers have staged large and frequent protests, highlighting their deteriorating livelihoods and poor working conditions.
The financial model of these platforms typically involves high commission rates per ride, which, combined with costs for vehicle maintenance and fuel, can significantly diminish drivers' net earnings. In response, some new models, such as Namma Yatri's no-commission approach and subscription-based models for auto rickshaws by other players, have emerged to provide some financial relief to drivers with maximised earnings.
A recent survey by PAIGAM and IFAT highlighted the extent of the challenges faced by platform-based drivers. The data reveals that over 70% of drivers struggled to meet their financial needs, with 43% reporting earnings of less than Rs 500/day after expenses. Moreover, 83% of drivers work more than ten hours per day, and 31% exceed 14 hours daily. This demanding work schedule is exacerbated by high commission rates, arbitrary deductions, and frequent exposure to workplace violence, leading to significant physical and mental health issues. In light of these findings, state governments like those in Karnataka and Rajasthan are beginning to implement Gigwork Welfare Bills to ensure that platforms like cab aggregators provide essential social security benefits to their drivers.
Electrify or Bust?
Navigating compliance is a tough prospect for mobility aggregators, especially with the shifting environmental and vehicular emission standards. As these companies, which contribute significantly to the number of vehicles on our roads, pivot towards greener solutions, they face the uphill task of electrifying their fleets. While pioneers like BluSmart use this transition as a competitive advantage, many others are racing against the clock to meet carbon emission reduction targets and commit to fully electric fleets by 2030. Yet, this shift also brings its challenges. Amid Delhi's pollution crisis and last year's looming threat of the Odd-Even scheme—which could have barred NCR vehicles—mobility aggregators found themselves in a tough situation, despite the scheme's eventual withdrawal. On the flip side, Delhi’s recently introduced Motor Vehicle Aggregator and Delivery Service Provider Scheme demands that aggregators electrify their fleets and register all onboarded electric vehicles. It puts a hefty economic burden on gig workers transitioning to costly and often impractical EVs. The hurdles are steep—high costs, limited charging infrastructure, and potential drops in productivity. (see Aakhya Weekly #72) The smoothness of this transition remains in question. To truly support this green shift, investing in robust infrastructure is the need of the hour, including dedicated charging stations and rest stops for gig workers even for mobility aggregators. For mobility aggregators, tackling congestion and pollution will be key as they shift toward a cleaner future.
A Balancing Act
While these aspects highlight key challenges, they are yet to explore the full spectrum of issues the sector faces. The evolving app-based mobility aggregator sector in India underscores the delicate balance between ‘sarkaar’ (government), ‘bazaar’ (market), and ‘samaaj’ (society). As these aggregators forge ahead, they must navigate a complex interplay of regulatory frameworks, market dynamics, and societal expectations. The effectiveness of this balancing act will determine how well these services adapt to fare regulation, enhance gig worker welfare, and meet clean mobility standards. Moving forward, the key to success lies in aligning sarkaar's policies with bazaar's innovations, and samaaj's needs, a hallmark of effective policy-making.
Book of the Month
India’s Near East- A New History: Avinash Paliwal
Reviewed by Sasanka Kanuparthi
Online Purchase Link
Released on 25th July 2024, Avinash Paliwal’s book, India’s Near East- A New History, could not have arrived at a better time. Exploring the troubled history of the subcontinent since India’s partition, the book offers a nuanced understanding of the persistent faultlines in the region. It is a meticulous and comprehensive exploration of India's foreign policy, particularly focusing on its approach towards its eastern neighbours—Bangladesh, Myanmar, and the northeastern states of India. Through an in-depth analysis of historical events and geopolitical manoeuvres, the author effectively illustrates the complexities and challenges that have shaped India's strategies in these regions. Given the dramatic ouster of Prime Minister Sheikh Hasina a few days ago, due to the escalation of student protests and police action, the book is a timely read for those seeking a deeper understanding of the threats posed to India’s national security from the East.
One of the book's central themes is India's delicate balancing act in Bangladesh, particularly following the assassination of Sheikh Mujibur Rahman in 1975. Fascinatingly, the book vividly describes India's cautious yet strategic response to the coup in Bangladesh, a scenario reflective of Bangladesh’s current realities under the new interim government formed after Sheikh Hasina’s exit. Furthermore, it delves into how India, wary of the emerging pro-Pakistan sentiments and the influence of China and Saudi Arabia, had to navigate a landscape fraught with political and military uncertainties. Avinash Paliwal sheds light on India's dual approach—considering both covert military support for anti-regime forces and diplomatic engagement to prevent Bangladesh from slipping into an adversarial alignment.
In addition, he also highlights the importance of India’s historical ties with Bangladesh, underscoring how these relations were tested during periods of political upheaval, such as the 2009 BDR mutiny. The book provides incredible insights into the lesser-known aspects of India’s covert strategies. For instance, it includes a detailed account of how India nearly intervened militarily to protect Prime Minister Sheikh Hasina during the mutiny. It reflects India's deep-seated concerns about stability, fears over actions of adversarial actors and vested interests, while India attempts to secure its socioeconomic interests. The narrative reveals the high stakes involved, as New Delhi viewed the mutiny through a Pakistan-centric lens, fearing the destabilisation of Hasina’s government could lead to increased militancy and security threats to India.
The book doesn’t shy away from discussing the less-than-ideal aspects of India’s foreign policy, as the author also critically examines India’s various policy hesitations. For example, India was reticent to formally recognise the new regime in Bangladesh after Sheikh Mujibur Rehman’s assassination in 1975, which fueled suspicions and strained diplomatic ties. The author also explores the challenges India faced in dealing with the insurgency in its northeastern states, exacerbated by the complex political dynamics in Bangladesh and Myanmar. He argues that India's cautious and often reactive approach in these regions reflects its broader national security and regional stability concerns, showing an eerie resemblance with the situation in Bangladesh today.
Beyond the deeply researched historical account, the book also offers a commentary on India’s strategic choices and long-term implications. The detailed exploration of the role of intelligence agencies like R&AW in shaping India's covert operations in Bangladesh provides readers with a nuanced understanding of the intersection between diplomacy and military strategy.
India’s Near East should be an essential read for anyone interested in understanding the subcontinent’s security challenges, and India’s foreign policy hits and misses in the East, throughout its independent history. Avinash Paliwal’s thorough research and insightful analysis make it a valuable contribution to security studies, offering readers a clearer perspective on the challenges and intricacies of statecraft in one of the most geopolitically sensitive regions of the world.
A Few Good Reads
Sheikh Hasina's dramatic departure leaves India on a diplomatic cliffhanger with Bangladesh writes Nirupama Subramanian.
Haseeb Drabu notes that the J&K Budget shows a drop in investment and rising woes, arguing that Article 370's removal has not delivered the promised prosperity.
A week of far-right violence in England reveals the dangerous impact of online hate and mainstream prejudice, warns Joe Mulhall.
T K Arun exposes how Kerala's landslide crisis is a grim mix of inadequate disaster response, political negligence, and environmental exploitation.
Asmi Sharma and Nancy Pathak critique the 2024-25 budget for its inadequate support of unorganised workers amidst rising economic disparities.