Seeking clarity on how US-based Uber sets its surge pricing, Nitish Parmani has begun a campaign on online platform Change.org “to get Uber to respond and regulate their surge pricing”.
In October, Uber ran an online petition against the Maharashtra government over its draft rules on city taxis that mandated restrictions on app-based aggregators such as Uber and Ola. Globally, Uber has run campaigns in London and in New York state in the US, urging thousands of customers to sign petitions against local government rules to restrict app hailing firms such as Uber.
App-based aggregators such as Uber and its Indian rival, Ola, say surge pricing kicks in when there is excessive demand for cabs in a particular area. The notion is to deter some customers and delay their bookings with the increased cost of travel, while others who are willing to bear the extra cost can book the cab.
Parmani’s post on Change.org garnered support from more than 31,000 users at the time of going to press. The petition is addressed to Amit Jain, head of operations at Uber India, and Travis Kalanick, global chief executive. It asks the company “to regulate surge pricing, so that it is used only when you cannot meet customer demand, and not as a regular fixture”.
“I had more than eight Uber cabs available around me and still had to pay 3.8x surge pricing,” wrote Parmani. While Uber claims surge pricing also attracts more drivers to offer rides during peak hours, the money does not necessarily go to drivers, he adds.
An Uber spokesperson denied this. “Surge doesn’t only depend on the availability of cabs but also the number of customers in that area. If you’re seeing eight cabs, it’s very possible that there are over 20 customers around your area trying to book the same cabs,” said the spokesperson. She added that Uber continues to charge its 20 per cent cut from driver partners even during surge pricing.
Meanwhile, Uber has reduced its prices by nearly a fourth in Chennai and Kolkata, to get more users on its platform. “We are hoping this price drop creates more accessibility for people in the city. Higher demand also means more trips for our partner drivers and increased earnings for them,” stated Bhavik Rathod, its general manager, south & west India.
Says Uber: “While pricing is a science, every city is different: different economic circumstances; different regulations; different competition. We’ve learnt over the years that we do best when we test new things. With each new test, we learn more about the choices riders make, and how those impact earnings for drivers.”
Uber claims it has a little over 250,000 driver partners on its platform. Ola says it has over 350,000. Despite these large numbers of cabs, they say they’ve only scratched the surface. Ola chief Bhavish Agarwal has said 99 per cent of the taxi market in India remains untapped.
Uber and Ola have committed to spend a combined Rs 15,000 crore or $2.3 billion, raised from venture capital firms, to dominate the app-based taxi hailing market in India, as an alternative to the country’s lack of efficient public transport. The bulk of the money is being spent on incentives to drivers. It’s common for drivers on both platforms to earn between Rs 45,000 and Rs 85,000 a month, if they exploit the incentive structure of Uber and Ola that has them doing in excess of 12-14 trips a day.