Pando

Uber paying its Delhi drivers $1.5 million per month while they're off the road

By Michael Carney , written on December 31, 2014

From The News Desk

Uber got the green light from Delhi regulators earlier this week to operate in the Indian capital city, but it will still be some time before the company’s cars are once again transporting passengers. In the meantime, Uber is taking steps to stay in the good graces of its 2,500 existing drivers.

The ruling stipulates that taxi aggregators must first apply for a license – something Uber has yet to do. Aggregators must also meet mandatory vehicle and equipment requirements, such as deploying calibrated meters and GPS devices, as well as the use of Compressed Natural Gas (CNG) rather than gasoline as fuel. The latter could mean that Uber needs to either retrofit all existing driver-owned vehicles in its makeshift fleet, or help them purchase new vehicles – both options which will be expensive, time consuming, and potentially fraught with unintended consequences.

But the big news coming out of Delhi today is that Uber is continuing to pay its drivers while they’re off the road, compensation that’s being calculated as an average of their income across the four weeks preceding the company’s December 8th ban, following a headline-making alleged rape by one of its drivers. The Economic Times reports that the average driver is earning approximately Rs 40,000 per four weeks (or USD $633 at current exchange rates; equating to $8,229 per year) prior to the cost of fuel, which drivers won’t have to purchase during the ban.

The total outlay will cost Uber more than USD $1.5 million per month for as long as its drivers are off the road, in addition to the fleet upgrade costs.

A senior Uber executive tells the Times:

"We believe it's the right thing to do. And we will continue to support the drivers who have put their trust in us. We can't let them or their families go hungry.”
Uber had previously committed to spending $500 million to enter and scale its operation in the massive Indian market. And with $2.4 billion in venture capital raised in 2014 alone – out of a lifetime total of $3.3 billion raised, and counting – it can surely spare the cash.

Keeping its existing drivers well-paid could be key to keeping them from fleeing to Uber’s local rival OlaCabs, which already has roughly double its number of drivers at 5,000. But, however long this initiative lasts and however much it costs, it’s yet another example of how Uber’s culture of “ask for forgiveness, not permission” continues to cost the company time and money. Remember, Uber is still fighting for the right to operate in Spain, France, Germany, Thailand, Nevada, Portland, and likely other markets as well, and is also the subject of a handful of lawsuits over misleading pricing practices and the misuse of credit reports in driver screening.

Uber can’t afford to give up on the massive, and potentially highly-lucrative Indian market. But it would do well to avoid wasting time and money on these regulatory skirmishes – something it’s becoming known for just as much as its ability to book rides.