Karnataka has fixed a maximum and minimum fare for cab aggregators, with slabs based on the cost of the vehicle
There has been a lot of protests against the 'surge pricing' or 'dynamic pricing' mechanism
Compared to other cities in India, driver earnings are much lower even as wait times are rising in Bengaluru due to regulatory caps on dynamic pricing introduced by the Karnataka Government and slow growth in compressed natural gas (CNG) adoption, a top executive from Uber said on Thursday.
"A Bangalore driver today makes 8-15% lower earnings versus a comparable vehicle in a city like Hyderabad, the net take home is 20-25% lower. The CNG infrastructure hasn't scaled up here, most are running on diesel. So the cost of operations of a vehicle are higher than Mumbai or Delhi, where the CNG penetration is deeper," said Prabhjeet Singh, Head of Cities of Uber India and South Asia. This information, he added, was based on two months of data from a study they undertook in 2019.
Karnataka has fixed a maximum and minimum fare for cab aggregators, with slabs based on the cost of the vehicle. There has been a lot of protests against the 'surge pricing' or 'dynamic pricing' mechanism that results in extremely high fares during peak hours. Commenting on this mechanism, Singh said "there should be a market which allows pricing to adjust based on what the demand and supply situation is".
Dynamic pricing, he added, allows them to show drivers the fare they may get in a particular area, which in turn allows them to decide on whether to come online or go offline or make choices like driving towards a location where there is a likelihood of making more earnings. It also helps riders decide on whether to wait for few minutes extra for the prices to change.
According to Singh, only one out of every five trips are subjected to dynamic pricing across India. In Bangalore, though, the average number of trips that surge are much higher, he pointed out.
Dynamic pricing, he claimed, "leads to better utilisation of the asset." Referring to a 'wild goose chase' concept described in a published research paper, he said that if dynamic pricing was switched off, "as a system, you will actually end up completing lesser and lesser trips". This would be the case, he explained, because the driver would spend more time in going to pick up a passenger versus actually completing a trip. If there are high prices all the time, lesser customers will request for the service, resulting in lower utilisation, he said.
On fare regulations that have been introduced, Singh said he believes they were introduced "with the intent of being friendly to consumers". However, he added, "there is lower and lower incentive (for drivers) to drive during the peak hours," and they are not sufficiently compensated for the fuel and time spent on the road.