CNBC TV18 Column: Drones Flying away with Jobs

Across cities in India, speciality restaurants are coming up. Many are specific regional cuisine. Others from across the world. And, most survive mainly on home deliveries. The food revolution has come to India via a most unexpected source – the mobile. The smartphone has put choice in the hands of the customers in terms of food. Indians are ordering more food delivered home than ever before. And, it is not just a metro phenomenon. Consumers in over 200 cities and towns across India, place 35-40 million orders on food apps each month. And, a key part of this ordering is the speed at which the food will be delivered. That looks to change radically in the near future.

Among the more visible displays of the digital economy at play, in India, is roads jammed with two-wheelers that deliver on the promise made by food delivery apps. Zomato and Swiggy drivers dot our roads, darting about on their motorcycles, rapidly delivering food to us. On-demand. It is estimated that the two major players account for over 80% of the market for food delivery. And, delivery is a key part of what they do. Gone are the days when Zomato acted merely as the aggregator, allowing the customer to order food directly from whichever restaurant provided delivery. Today both majors provide a kitchen to the door service. Someone has to pay the cost of delivery, and it is not the customer. With restaurants wary of lowering margins, the bulk of the cost of wages of the delivery boys are picked up by the food delivery app. With a price sensitive customer, a margin protective restaurant segment – all food delivery apps are reeling under the cost of delivery.

And, there is one other cost. A hidden cost. A huge externality that has been caused by the success of the food delivery apps as a consumer convenience provider. And, that cost is the environmental damage caused by food delivery apps. First, there is the congestion on the roads. The second is the increased use of fuel in making those deliveries. The third is the inordinate mounds of cutlery and plastic that is used – estimated at 22,000 metric tons each month. Each of these is a cross mark in a world that is increasingly aware that it is running against rising temperatures.

Essentially what the food delivery apps will try and do Is mitigate these two costs. One to cut their losses, and hopefully inch towards a profit. And, the second is to cut their carbon footprint and earn brownie points to the bargain. And, both objectives are met by the idea of using drones to deliver food. Recent reports suggest that Zomato is testing drones to deliver food, and there are two issues on the use of drones to perform jobs that are being done by people now.

The first part of the issue is the legality of using drones to do anything. There is a no-fly policy in place right now, while the Director General of Civil Aviation (DGCA) waits for the government to put a policy in place. After all, if one company uses drones to deliver food, it is likely others will use it to deliver other things. And, sooner or later, drones will run into each other. While the idea of your Paneer Makhani crashing into someone Pizza Napolitana might seem the stuff comedies are made of, it really won’t be that funny if it happens in real life. At the most basic level, traffic rules for drones will need to be established, pretty much the way airlines follow routes. And it is likely, that sooner rather than later there will be a policy on using drones, traffic control, and even penalties for drone misuse. It is just a matter of time. Unless the Government sees security concerns in using drones, it is unlikely that they will be banned. It maybe heavily regulated, but a ban would go against the image of a Government out to improve the ‘ease of doing business’.

The second part of the problem is even more serious – and that is the impact this will have on jobs. It isn’t like India is flush in jobs or managing to create new ones that will employ large swathes of unemployed youth. It is estimated that the average delivery boy earns between 25,000 and 50,000 per month by just ferrying our food from the restaurant to our house. What would happen to these jobs and incomes? The standard free marketeer response to this would be ‘there will be new jobs.’ However, right now no one has seen those jobs or has any information on what shape or form those jobs will take.   

And, therein lies the dilemma. Do you ban all drones that will reduce congestion, improve the environment, and move companies towards profitability? Or do you protect jobs? Both are important policy considerations. Can you really stem the rush of the future? And, if the future says drones, do you push it away? Can India really be left behind in the development and use of drones? And, herein comes Government policy on how, if at all, drones will be allowed in commercial space, and how will they put in place policies to mitigate the loss of jobs. One of the things that the Government could look at is the Robot Tax, suggested by Bill Gates. As per Gates, the loss in jobs is accompanied by a loss in the tax revenues earned by the Government, and the tax should be aimed at redressing this. He suggests that the monies collected from the “Robot Tax” go towards retraining people for the jobs of the new economy.

There are many solutions that need to be found, as the digital economy moves on from disrupting traditional business models to disrupting itself. But for that policy makers need to have a conversation with the industry, workers groups, and academia. There can be no knee jerk response to this issue. It is about the future, and has to be handled carefully.

News Reporter

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