Chennai has a complex transportation system with a mix of buses, rail, metro, autos, taxis, and all the other private transport means. The public network systems, while vast, are not always tied in efficiently, meaning that commuters are often left with lags in their journeys as they switch modes (for example from a Metro train to a bus). To make these crossovers easy and painless, Chennai’s fleet of autorickshaws and taxis should be able to step in the gap, at least in part, operating as first and last mile connectivity agents. The reality though is more complex than the facts might suggest. Chennai commuters and its taxi/auto drivers have for long been in a pricing tug-of-war, with Chennai-ites having plenty of stories to tell about nightmare negotiations with drivers. All of these experiences contribute to commuters preferring private transport, which in turn sets off a vicious cycle of congestion and pollution.
The entry of ride aggregators, namely Ola and Uber, was therefore a welcome relief to Chennai commuters. Pricing was pre-set now, offering a level of comfort to commuters. However, their relief was short lived, as soon news began appearing that maybe Ola and Uber were not being entirely fair to their drivers. The drivers attempted to take corrective action to aggregator pricing policies by frequently cancelling rides, taking commuters back to the unpredictability of the yesteryears.
Starting in early February, the passive cancelling of rides, turned into strikes as cab and auto rickshaw drivers in Chennai announced a strike against Ola and Uber. They declared that they would not accept new rides from either of these apps. The boycott stemmed from the service providers taking 25% to 40% of the drivers’ commission per ride. This, drivers claimed, left them with little to no means to sustain their livelihood.
In a comprehensive review of Uber by the Competition Commission of India following allegations that the company was using its dominant position to establish predatory pricing that would oust its competitors out of the market, the CCI acknowledged that while Uber did use ‘below cost pricing’ (going into as much as a loss Rs 204 per trip), it could not be established that it had a clearly dominant position, and it could therefore not be accused of predatory pricing on the basis of its position. However, the ‘below cost pricing’ together with these aggregators’ large commission rates typically used by the duopoly of Ola and Uber is one of the reasons that a driver’s income is driven lower. Also, unlike commuters themselves, who count as consumers and are protected under the Consumer Protection Act, the drivers have no law in place to protect their interests.
Tellingly, drivers show a preference for platforms such as NammaYatri and Rapido which operate on a zero-commission model. In this model, no commission fee is charged. Instead, a one-time fee or subscription fee applies per day. For instance, a driver may be asked to pay ₹25 for the entire day. The income that they earn for each ride is left to themselves entirely. This provides drivers with increased opportunities and earning potential.
An Un-Fare (Unfair) Regulatory Framework
What would be a fair fare outcome for both drivers and commuters would be a fare mechanism that would not leave commuters at the mercy of drivers, or drivers at the mercy of aggregators. This can be established only if the government sets and enforces fares. In 2013, a Government Order fixed the fare rate for auto rickshaws. However, these regulations have remained on paper.
Leaving drivers to fight it out with the aggregators might not only be unfair to the drivers (as aggregators have significant bargaining power) but also detrimental to commuters. For many drivers, there is no other option but to rely on service providers such as Ola and Uber. Since other transportation options such as shared autos are not formally regulated by law, this remains one of the few viable means of employment for these drivers. And for many commuters, autorickshaws and taxis are essential phases of their journey to work or home.
The absence of fare revisions also results in lower compliance to other regulatory measures. For example, while the government has mandated meter usage, compliance from drivers remains low. Studies indicate that this stems from infrequent fare revisions, as well as poor enforcement and a culture of negotiated fares that drivers perceive as more profitable during peak hours.
It is likely that if fair revisions were done in a more timely manner, drivers will prefer to be their own bosses and drive their own profits, instead of relying on aggregators. In fact, two drivers who were interviewed for this piece, Sankar and Balaraman, mentioned that they would prefer to use the meter instead of these apps if the government revised the fare structure. Due to rising fuel prices and increasing maintenance costs for their vehicles, the current meter rates are simply unsustainable for them to make a living. Another driver, Bhagyaraj, shared that his earnings from Ola and Uber are also hardly sufficient. The drivers feel that they are not adequately compensated for the fuel and labor involved in picking up customers by travelling from the drivers’ initial locations. Additionally, they reported that the apps implement arbitrary pricing, leading to the drivers feeling subservient to these platforms.
There is no doubt that while competition is essential for a thriving market, allowing aggregators to control pricing to these levels is probably detrimental to consumer interests. In fact, apart from indirectly being affected by Ola and Uber’s pricing plans, these aggregators directly impact consumers who often face surge pricing during peak hours, increasing costs by 1.5-3x. In addition, recent experiments also seem to suggest that some of the platforms have pricing variations based on completely unfair mechanisms such as the phone used to book the ride. Experimenters found that rides booked using iPhone were charged at significantly higher rates than those booked in Android phones. Meanwhile, those hailing non-metered street autos typically face refusals for short distances, arbitrary pricing that varies by time of day and location, and often uncomfortable negotiations. (The auto drivers too, expressed their discomfort with negotiations as they are often unsuccessful).
A Striking Phenomenon: Strikes in Other Cities
Strikes against Ola and Uber are not uncommon. These occurrences have taken place in other cities as well— including Delhi, Bengaluru and Mumbai. The situation in Delhi over the past few years is strikingly similar to what is happening in Chennai. In 2022, the Delhi Government had set up a fare-fixation committee. Yet, there has been no tangible change since. Drivers continue to favour the zero-commission model of service providers such as Rapido over the revenue structure of Ola and Uber.
A potential solution to this problem may be to mandate a cap on the percentage of commission that a service provider is entitled to charge. For instance, a 20% cap on commission was introduced in Maharashtra in 2020 (though there is an insufficient amount of data to assess its efficacy). Further revisions to the caps are being proposed, to keep the profit margins of these providers within 5% - 8%. However, this is not without drawbacks. Often, especially for shorter distances, commission caps may lead to business operations being wholly unprofitable for the service providers. Due to this reason, the Karnataka Government’s attempt to install a 5% commission cap has not been successful. Another possible option is to find a middle ground in relation to commission caps (around 15 - 20%). This would keep the interests of the drivers in mind, while accounting for the overall profits accruing to service providers such that neither party is affected.
Auto-Correcting the System: Way Forward
The drivers’ strike in Chennai reflects a range of systemic problems that are prevalent throughout India. Balancing stakeholder interests continues to be the most challenging aspect.
The government’s role in fare regulation needs to be the first step to fixing this complex scenario. Mumbai presents an instructive model - in 2022, the Maharashtra government not only upheld its capped commissions but also implemented a comprehensive fare structure. The Mumbai Metropolitan Region Transport Authority (MMRTA) regularly revises fares based on CNG prices and other operational costs. Drivers in the city use the digital fare meter, which runs on suitable rates due to continuous fare revisions. This demonstrates how active government intervention through regular fare revisions and strong enforcement can create a more balanced ecosystem. Chennai could benefit from adopting similar measures.
Beyond the commission structure, addressing auto-rickshaws’ vital role in first and last-mile connectivity is essential for Chennai's transit ecosystem. Auto-rickshaws fill critical gaps by connecting commuters from homes to metro stations, bus stops, and workplaces. Metro passengers rely on autos for their first or last mile connectivity, as acknowledged by the CMRL. In 2018, a pilot program was introduced by the CMRL involving share-autos for last-mile connectivity. Recently, MTC minibuses are being used. However, a readymade fleet of autorickshaws and taxis could easily be integrated into the system to benefit daily commuters, offering them predictable pricing, reliability, and coverage across the city without disruptions. Chennai could implement zone-based fares specifically for first/last mile connections to transit hubs, potentially subsidised during off-peak hours to ensure consistent service availability without compromising driver earnings.
As with every policy suggestion, more data collection mechanisms are required to assess the effects of these programs. The concerns of affected parties can be effectively addressed if commission caps and fare revisions are introduced based on their actual impacts.
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