Policy Jigsaw For Uber – Analysis


By Suyash Srivastava

With the recent loss of license to operate in London, does Uber need to revamp its policies in India for letting drivers operate under its company banner? The company’s quintessential stand since its inception has been that it is a technology app based service provider company – yet it is always in conflict with government in various jurisdictions over its operational policies, usually for not being able to fully comply with the local outdated laws that do not match with company’s technology disruptive business model. However, while facing issues such as women safety and surge pricing, Uber in India has been suavely able to adapt to bureaucratic and people’s demand from time to time by making some key changes in its operational features, and making itself profitable since it entered Indian market in 2013 with the exception of FY 2019.

The state governments in India until recently was in a conundrum between classifying Uber as a technology company and an app-based radio taxi service. However, with the introduction of new Motor Vehicle Act, 2019 (“MVA”) from September 1, the government has categorized the company under the terminology “aggregator” – literally defining it as “a digital intermediary or market place for a passenger to connect with a driver for transportation”. While the legislature in India has finally recognized the company disruptive model, the state government (road transport is a state subject which comes under List II of the Indian Constitution) will still have to frame the rules keeping in interest both customer’s safety and aggregators interest. In New Delhi, the City Taxi Scheme, 2015 already regulate operation of aggregators, and a casual reading of the scheme will suggest that the aggregators must adhere to a very high standard of rules regarding customer’s safety and service. In addition to the MVA, 2019, the aggregators must also be registered as a company or firm or an individual under the Companies Act, 2013 to obtain licensee, and comply with the provisions of the Information Technology Act, 2000.

The landscape between 2013-16 was a golden period for cab drivers in India as many of them joined with Uber and Ola after leaving their lucrative profession of medicine, engineering, law, etc., and started earning as high as one lakh rupee a month. After 2016, finances of Uber started dwindling due to heavy competition and they virtually eliminated the incentive system offered to drivers in order to maintain their own positive balance sheet. Incentive system ensured that the cab drivers didn’t say no to trips and were rewarded in cash on completing number of trips in a day. While the public rejoiced due to low fare, better connectivity, more cab options etc., the cab drivers has ever since suffered not being able to support themselves due to heavy loss in income. Despite number of strikes by Uber and Ola drivers across cities in India, the cab aggregators have not been able to come to a satisfactory solution and pacify drivers again. Even the government since the very beginning have taken cab drivers transgression as drivers problem and not Uber’s – whether related to surge pricing, harassment complaint or recent increase in traffic fines. Cab drivers having low income and without any social benefits has become a global trend now.

However, the lawmakers in California have tried to change this by recently approving a landmark ‘Assembly Bill 5’ requiring gig economy companies such as Uber and Lyft to treat their drivers as employees and not contract workers. The Bill will come in effect from January 1, 2020 following which the gig economy workers (including drivers) working for these companies will have access to basic protection like minimum wage, overtime and unemployment insurance. This move has marked a significant shift in strategy of worker protection covering 1 million gig economy workers in California to be treated as conventional employees. Similarly, in India it is estimated that almost 93% of the economy works in an informal sector, including at least 1 million drivers currently running cabs for Uber and Ola. The draft of the ‘Code on Social Security, 2019’ is already out in India at par with California’s ‘Assembly Bill 5’, which aims to consolidate eight existing labor laws of the country. The legislation will fulfill long time demand of the gig economy workers (especially Uber and Ola drivers) in India to be treated as employees instead of independent contractors, and ensure minimum protections such as minimum wage, provident fund and employee state insurance. The ramifications of this new legislation will be huge as India has one of the biggest workforce in the informal sector, and the country’s job market will inevitably go through a major job disruption in foreseeable future – forever changing the employer and employee relationship.

So is it possible that a similar fiasco for Uber in London can also happen in New Delhi or any other state in India? The primary reason London Transportation Regulator revoked Uber’s license is because at least on 14,000 trips, the drivers who accompanied passengers were not who they said they were, thereby, putting passengers safety at risk. At least, 43 drivers were able to exploit Uber’s app and make these unauthorized trips. However, Uber immediately conducted audit of all its drivers and has since fixed the issue. As opposed to London, Uber in India has a real time identification checking feature since 2017, under which drivers are periodically asked to share their selfies with the company. This feature ensures that the driver behind the wheel matches the record in Uber’s database. Therefore, it is unlikely that the cab aggregators in India will have to face a similar London like situation, but there are other policy and safety aspects which the company needs to worry about.

Overall the company has been able to understand customer’s demand in India and make necessary policy changes as and when required. When cases of sexual harassment increased, emergency buttons were made mandatory by the government, which Uber introduced as part of its safety tool kit. When passengers cried about surge pricing in Delhi and Bangalore, the respective state governments declared a surge price limit to which the company simply obliged. When traffic situation started to worsen at airports, aggregators like Uber and Ola readily agreed to pay for the dedicated pick up areas. However, changes regarding women safety still remain contentious due to shoddy implementation and cases of sexual harassment becoming more common. Uber still needs to ponder upon an effective way to make its driver train and understand that they have been vetted, and any misbehavior on their part will lead to strict action from the company and police. The company can also think about adding a feature where a red signal is flagged whenever drivers take detours at wee hours. The state governments has been quick to incorporate necessary policy changes whenever the ‘Junta’ has raised any issues and the company has been equally swift to adapt. Whether Uber’s success story in India despite its ups and down reflects the ‘startup heaven’ accommodating culture in India is something to think about.

Observer Research Foundation

ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

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