‘Advance tipping’ on ride-hailing apps is merely a symptom of lax law enforcement

In a post on X last week Pralhad Joshi wrote, “Forcing or nudging users to pay a tip in advance for faster service is unethical and exploitative," adding, “Tip is given as a token of appreciation, not as a matter of right, after the service." 

On the minister’s prodding, the Central Consumer Protection Authority is probing the matter and has already issued a notice to Uber. Similar notices to Ola and Rapido, asking them to explain this practice, are likely to follow.

Following Rapido, Ola and Uber recently absolved themselves of setting a price for an autorickshaw ride. They do provide an ‘indicative’ price range, but it is left to the consumer to negotiate the final price with the driver.

Also read: Mint Quick Edit | Uber’s pre-ride tips aren’t tips

In addition, these apps have introduced an ‘advance tip’ system, nudging users to pay a little extra. They claim users who do so are more likely to get a ride, since the extra amount goes to the driver.

It remains to be seen what the Central Consumer Protection Authority says about this. On the face of it this kind of ‘price nudging’, while irritating, is not illegal per se – at least not at the moment. But it is certainly not ethical, and may be downright illegal if this ‘advance tip’ system is found to be linked with faster ride-allocation at the back end.

Price gouging in another form?

It also offers a veneer of technological respectability to what is simply price gouging by vehicle operators. It is an open secret that ‘going by the meter’ is the exception rather than the rule in most Indian cities. Operators of metered public transport vehicles such as autorickshaws and taxis tend to charge arbitrary fares, refusing to go by the meter, because the law is rarely enforced, if ever. Consumers, caught between the need to travel and the lack of options, end up paying the price. 

Also read | Tip us first: Why new Uber push faces government ire

What ride-hailing apps have done is to legitimise this in the name of ‘advance tipping’. These apps don’t make money unless a ride is actually completed and paid for, so it is in their interest to encourage more rides by incentivising operators to actually offer their services.

Tipping culture

There is of course the larger question of tipping and where it is appropriate, or even necessary, to add a tip. In the US, where tipping is widespread, several studies have shown that it is directly linked to minimum wages. Several states in the US have two different minimum wages – a higher one without tips, and a much lower one, where the employer is supposed to allow employees to make up the difference through tips.

That is not the case in India. Our minimum wages are not only low, but are calculated taking into account only basic requirements such as food and shelter. ‘Social’ requirements such as education and healthcare are not factored in. We have a ‘Code on Wages’ that was passed five years ago but has not yet been implemented. There is also a national minimum floor wage but it is non-binding and most states have chosen not to implement it in a bid to attract investments. Minimum wages have not been revised for the past five years, despite high inflation.

Also read: Rapido eyes a bigger slice of the ride-hailing market with four-wheeler push

Platforms have bypassed even existing laws by classifying service providers as ‘independent contractors’ rather than employees. The authorities are trying to address this through regulation. In the case of ride-hailing apps, Karnataka, Maharashtra and Delhi already have rules covering this, including caps on surge pricing, driver licensing and onboarding requirements, vehicle inspection protocols, and insurance mandates. Many other states have similar measures in the works.

But these rules are consumer-facing and don’t address the needs of the vehicle operators. This has led to widespread ride denials, which in turn has prompted the advance tipping ‘fix’. Gig workers on other types of platforms – food delivery, quick commerce, e-commerce, and personal and household services – do not even have this vestige of legal protection.

Root of the problem

All this is symptomatic of a deeper malaise – the failure to implement the letter and spirit of the law. It is not that we don’t have laws, rules and regulations. It’s that they are simply not enforced, or enforced so weakly that there is flagrant disregard for them. The ride-share market came into being because of the lack of enforcement of the meter system, as well as the artificial scarcity created in taxi and autorickshaw licences. 

Their failure to provide a fair return to the service providers has in turn created space for workarounds such as pseudo-voluntary fare hikes in the form of surge pricing and advance tipping. Unless the root cause is fixed, such irregularities are bound to recur, and the consumer will pay the price.