Are you sure surge pricing isn't taking you for a ride?

Karan Seth
Karan SethApr 21, 2016 | 16:50

Are you sure surge pricing isn't taking you for a ride?

For every action, there is an equal and opposite reaction, and today, a totally disproportionate reaction on social media.

Over the past few days, the Aam Aadmi Party-led Delhi government has threatened to take ham-handed action against Ola and Uber, and restrict surge pricing. These companies have (for the time being) acquiesced and removed it.

However, a lot of people, self-proclaimed aam aadmis, ever out to advocate for a good cause, have jumped in and aired an equally ham-handed reaction against the government's move on social media.


I keep hearing the following arguments over and over again.

(1)    The government cannot interfere with the workings of a private company.

(2)    The government should not interfere in demand and supply economies.

(3)    The surge prices incentivises their drivers and causes them to ply at times, keeping the roads safe and makes getting cabs easier.

Uber and Ola had to cancel their surge pricing scheme after Delhi government intervened. 

First of all, India has a Constitution. In the preamble of the Constitution, India is a socialist republic. This essentially means that in India, the government can interfere with how a private company does its business if it thinks that the business is against public interest. Secondly, with respect to the government not interfering in demand and supply economies, have these people forgotten that when autos and black-and-yellow cabs refused to run by the metre, and ask for 2-2.5x of the cost, everyone and their grandmother clamoured for regulations and laws to remove this blatant overcharging? And now that big corporations are doing it, and giving it a fancy name like surge pricing, suddenly it is okay?

I have seen the fare go as high as 10x of the actual fare.

Governments have risen and fallen with the rise and fall in onion prices; commodities like petrol and diesel are still regulated to an extent.

Delhi government needs to regulate pricing mechanism based on ground realities.

There is always a demand and supply economy. Indian governments have always interfered with it for one reason or the other. Most times, it is people who themselves want the government to interfere. People on my Facebook have been posting that they are aam aadmi and are fine with surge pricing, but these "aam aadmis" have disposable incomes.

They are just speaking for themselves. They are not aam aadmi by any stretch of the imagination.

Thirdly, I spoke to a few cab drivers over the last few days, what emerged is that at least one company has an incentive guarantee during peak hours. It guarantees cab drivers Rs 3,500 for taking seven rides, irrespective of how much they actually earn.

For example, if a cabbie earns Rs 2,000 rupees for seven rides, the cab company will provide them with 1,500 rupees on top of that. Cab drivers are completely unaware of whether they will be getting paid in surge price rates or normal rates when they accept the booking. They are also fined a certain amount if they cancel the booking.

Now a question to be asked is: do these companies that charge a commission of 20 per cent from the cab drivers, who are essentially a broker of sorts, that the aam aadmis are trying so hard to protect, actually care about us?


From what I have seen, it doesn't seem so. The cab companies are in fierce competition with each other to gain market share. This is resulting in what is known as the "Cobra effect".

The Cobra effect occurs when an attempted solution to a problem actually makes the problem worse. The term stems from the time of British rule of India. In its times, the British government was concerned about the number of venomous cobra snakes in Delhi. The government, therefore, offered a bounty for every dead cobra.

Initially this was a successful strategy as a large number of snakes were killed for the reward. Eventually, however, enterprising people began to breed cobras for the income. When the government became aware of this, the reward programme was scrapped, causing the cobra breeders to set the now-worthless snakes free. As a result, the wild cobra population further increased. The apparent solution for the problem made the situation even worse.

Are private cab companies taking us for a ride?

This seems to be what is happening now. Yesterday, I took a cab ride, the cab driver was probably below 18 years of age, and in any case looked nothing like the guy whose picture appeared on the app. He was polite but I could tell he didn't really know how to drive.

During the cab ride he got a call. I overheard the conversation and it was about the scheme itself. The cabbie was booking fake rides using alternate phone numbers for the job. When I got off, he asked me to use my alternate phone to book another ride, so that he would meet the quota and make Rs 3,500.

The cab companies have drivers who are gaming the system by subletting the cabs to people who can barely drive and have no background checks conducted by anyone, and by booking fake cab rides. There is no accountability in this system.

The cab companies in their competition have once again forgotten about the aam aadmi, who expects safety and security while taking a cab. How long before this leads to a problem, before there is a major accident or something untoward happens to a woman in a cab?

It is time the government steps in to regulate. It must speak to people, understand the ground realities and then take an informed decision. The surge pricing is not the worst thing that could happen.

Those who are advocating against the surge pricing, must understand that we will take advantage of any system to derive maximum profit out of it. We are not law abiding by our nature. We will break laws when we think no one is looking, and right now, no one is looking.

Last updated: April 22, 2016 | 12:02
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