Ola slashes fares in Bengaluru despite driver protests of falling earnings

Firm's Mini category fares cut from Rs 10 per km to Rs 8, Prime services from Rs 13 per km to Rs 10

Ola has slashed fares for customers by as much as 23 per cent in Bengaluru, its largest market in India, even as drivers in the city protest against reduced earnings due to decreasing incentive payouts and low fares.

In an email to customers in the city on Friday, the company said that it had dropped fares for its Mini category from Rs 10 per kilometer previously to Rs 8, and from Rs 13 per kilometer for its Prime service to Rs 10. Prices for Ola's Micro service continue to be Rs 6 per kilometer.

"We have revised our fares in Bengaluru, and we're now even more affordable than before! That means, whether it is a hatchback you need in minutes, or a comfortable sedan with Wi-Fi, when you travel within the city with Ola you save more," read the email.

Ola's price slash tactics also come at a time when it has accused rival Uber of "capital dumping" deploying foreign funds into the Indian market. The biggest allegation against Uber has been that of using its funds to discount rides for customers and pay incentives to drivers with the idea of putting Ola out of business.

In comparison, Uber's cheapest offering in Bengaluru starts at Rs 7 for a hatchback and Rs 8 for a sedan, according to website uberestimator.com. Uber does not breakup fares for individual services, instead giving users an estimated cost of a trip prior to booking a cab on the company's platform.

Drivers on both platforms took to the streets to protest reduced last month, claiming that the companies had made it harder for them to earn incentives as fares had hit rock bottom. Both Uber and Ola follow a driver payout structure based on their daily business rather than on the number of trips they complete.

"We cannot even pay our EMIs (equated monthly installments) on the cars as there is no business and whatever we do get is very low-priced," Tanveer Pasha, President of the Ola, TaxiForSure, Uber (OTU) Drivers and Owners Association, had said on January 24. "We don't want any incentives, we just want them to stick to the Rs 19.50 fare fixed by the government."

Apart from low fares, drivers have also complained about tapering demand due to the large number of cabs on Bengaluru's roads. It is estimated that the city has around 130,000 cabs on its roads, with over 100,000 of them operating on Uber and Ola's platforms alone.

Ola has slashed fares to fend off attacks from Uber even as it struggles to raise fresh funds. The company's largest investor Softbank has written off around $475 million in the value of its combined shareholding in Snapdeal and Ola in the nine months that ended December 31. Reports have suggested that Ola is in talks to raise new funds at a valuation of $3 billion, down from its peak valuation of $5 billion.