Vipin Kwatra, a 29-year-old from Delhi, worked for four years with a radio taxi company. A lean man with dark circles around his eyes, Mr. Kwatra would drive 18 hours everyday. He hated the taxing work but couldn’t escape it: he had to pay Rs.1,500 a day as subscription fee to his employer plus generate more to cover fuel, maintenance, and parking costs. As he drove across Delhi, lunch was often a plate of noodles from a roadside kiosk and several cups of sweet tea.
“Tea helped me stay alert,” Mr. Kwatra said. “But I became diabetic.”
Mr. Kwatra would return home around 8.00 a.m., talk with his wife for a few minutes, play briefly with his one-year-old daughter, and sleep. By noon, he was up and, after a quick shower, ready to be out again. He needed at least eight fares to break even, and many anxious hours were spent waiting for the next passenger, staring at the gadget on his dashboard that beeped when the control room sent a passenger his way.
Mr. Kwatra felt his radio car company had a rigged algorithm that matched drivers with clients, but halted business after five or six pickups. It was fixed, he says, to generate just enough for drivers to pay their fee to the company but keep them on-call for the longest hours. At the end of 18 exhausting hours, Mr. Kwatra made about Rs. 3,500. After subtracting fee, fuel and parking charges, he was left with Rs. 800.
“I felt cheated,” he said. “But there was no other option.”
Then, about a year ago, Uber, the global behemoth in app-driven, cab aggregation services, entered India. And Ola was born as its Indian challenge. Several thousand exasperated radio taxi drivers like Mr. Kwatra switched en masse from radio cab companies to Uber and Ola, which had disrupted the market with their tactics of low commissions, slashed fares, and driver poaching. In two years, Ola Cabs expanded from 10 cities to 100 cities and its fleet increased from 10,000 to 1,50,000 cars. Meanwhile, Meru Cabs, India’s largest radio cab service, reported a loss of Rs. 215 crore in March 2014.
As always, technology had disrupted the market, this time the taxi industry. In the mid-2000s, there had been a similar upheaval when radio taxis pushed the old black-and-yellow Ambassadors and Fiat Padminis out of business.
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Meru Cabs led by CEO Siddhartha Pahwa had come in 2007, with a promise to revolutionise the taxi industry. Rapid cell phone penetration and a driver-friendly mandate got radio cab companies off to an excellent start. Before allotting cars, Meru Cabs asked drivers for a down payment of Rs.15,000 and a daily subscription fee of Rs. 600. It agreed to cover vehicle maintenance and airport parking costs and promised them car ownership after four years. On an average, a Meru Cab driver made Rs.1,200-1,500 a day. Mr. Pahwa became the superstar of the post-liberalisation taxi business, starting with a fleet of 50 cars in 2007 that grew to 15,000 cars in eight years.
In 2010, Meru raised the daily fee from Rs. 600 to Rs. 800 and refused to cover maintenance and airport parking expenses. The drivers protested outside Meru’s Delhi office in Dwarka. A group of nightclub bouncers appeared on the scene and beat the drivers up. The strike broke; the drivers returned to their jobs. Mr. Pahwa’s company continued raising the fee. Today, a Meru Cab driver has to pay Rs. 1,500 as fee per day, besides bearing fuel, maintenance, and airport parking costs.
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The diminishing returns and long work hours made Uber and Ola an attractive alternative for drivers. The two companies also facilitated bank loans for drivers.
Mr. Kwatra sold his mother’s jewellery in August 2014 and raised Rs.1 lakh to make a down payment on a white sedan costing Rs. 6 lakh. His monthly repayments are Rs.15,000. In November 2014, he registered his car with Uber and within a week, the company invited him to the Delhi office, where trainers gave him a key ring, a pen and a smart phone that matches drivers with rides. They also lectured him on motoring etiquette.
“I am relieved,” said Mr. Kwatra, as we drove past Connaught Place in central Delhi. Every Tuesday, Uber deposits Rs. 20,000 in his bank account. “I don’t have to generate profits for Uber,” he said. “I work whenever I want to. I take a weekly day off and watch a lot of TV with my family.”
Uber doesn’t charge the drivers a commission. The company is focused on beating Ola, which charges drivers 20 per cent per ride. Uber has even slashed fares by 40 per cent, making some of its services cheaper than an auto-rickshaw’s.
Prabhakar Jha (42) from Faridabad, is watching the market closely. A former Meru driver, Mr. Jha is playing an audacious gamble. Since September 2014, he has purchased three cars through bank loans. Two are registered with Uber and one with Ola. He works with Uber and has recruited drivers for the other two cars. So far, he’s ahead of the game. He puts 60 per cent of his monthly income of about Rs. 2 lakh into paying his EMIs. But the thought of ride-sharing apps rigging the game, like the old radio car companies, fills him with dread.
Mr. Pahwa accused ride-sharing apps of using “predatory pricing”. He sounded frustrated: “They are abusing the capital to smoke out the competition so that they can create a monopolistic situation, which is not appropriate, which is unfair,” Mr. Pahwa said. “They are throwing tips at drivers, investing millions of dollars without creating any assets. What kind of business is that?”
Mr. Pahwa justified Meru’s rising subscription fee and reneging on covering maintenance and parking costs by saying that Meru was bleeding. “We were paying EMIs for every car and making sure drivers made money at the same time.”
Anand Subramanian, an Ola spokesperson, told The Hindu that only 3 per cent of Indians own a car and the company is focussed on serving the rest of the population in the shortest possible time. For the last two years, Ola has been aggressively raising money from various hedge funds. Last month, the company roped in Russian billionaire Yuri Milner, who pumped in $400 million. The company is valued at about Rs.15,000 crore ($2.5 billion).
“We are breaking down all the barriers,” said Mr. Subramanian. “We will continue to be the largest in the market.”
Mr. Jha is a worried man. He is an Uber driver who bought three cars on loan, but business doesn’t look as promising as it did last month. Last week, he didn’t get any work from Uber for three consecutive days. “I am tense,” Mr. Jha said. “I am heavily dependent on the two companies [Uber and Ola] and each company is attaching 200-300 cars everyday. They should stop somewhere. Drivers are increasing disproportionately and it has started to affect business.”
As the wait for passengers gets longer, he is reminded of his radio taxi days. “It’s not a good feeling,” Mr. Jha said.
jeelani.m@thehindu.co.in
