Fuel prices are off the charts in India, but urban residents remain relatively unaffected.
That is because ride-hailing companies have not raised their fares. “Honestly, it hasn’t affected me much, because Uber and Ola fares have been stable,” said Manek Kohli, a 24-year-old New Delhi resident.
Since the beginning of 2018, fuel prices have risen sharply in the country amidst a global surge and a free-falling Indian rupee. On September 10, this even brought together the country’s fragmented Opposition in protest.
However, ride-hailing firms are more worried about losing customers to rivals.
Even a slight increase in fares can weaken Ola or Uber’s position in the fiercely competitive market. “Consumers will not absorb higher fares, India being a very price elastic market,” said Ankur Nigam, partner at KPMG India. “For instance, if Uber raises its rates, most people will simply shift from Uber to Ola.”
Yet, someone has to foot the bill.
Burden on drivers
Drivers associated with these companies are paying higher prices for fuel even as their earnings remain the same.
Ola has over one million listed drivers, Uber has around 5,00,000. “I defaulted on my car loan’s installment this month,” said Arshad, an Uber driver in New Delhi. “Even after working 14 hours a day I am unable to save Rs 11,500 for the EMI. Even CNG [compressed natural gas] rates have gone up.”
The weak rupee has also led to a marginal increase in prices of the less-polluting CNG, the extensively-used fuel among cab drivers of Delhi and Mumbai. But it is in cities such as Bengaluru and Chennai that they are worst-hit.
“A driver will consume 160 litres of diesel in a typical month,” said Ujjwal Chaudhry, engagement manager at RedSeer. “Looking at an increase of Rs 10 since the start of the year in diesel prices, he is losing Rs 1,600 from his take-home income. An average driver’s take-home income is Rs 20,000-Rs 25,000. So it is approximately 7%-8% of his take-home income.”
Amid mounting losses, ride-hailing firms have also slashed monetary incentives for drivers, which had so far been a major attraction to bring cabs on-board. “The drivers are stuck because many of them bought their own cars just for this,” Nigam said. “ But they have taken haircuts already, with a lot of their incentives gone away. The drivers will also not be able to bear it.”
Uber did not respond to questions, and Ola declined to comment.
This article first appeared on Quartz.
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