That's the finding of a study by the Research Institute of Socio-Economic Development (RISED), which concluded that more than 70 percent of current customers would cease using ride-hailing services if fares are set higher than Rp 2,800 (20 US cents) per kilometer.

At present, Go-Jek’s lowest rate for ride-hailing services is Rp1,900 per km for long-distance rides in Jakarta, while Grab’s lowest rate is Rp 1,800 per km under similar circumstances.

Short-distance rides in Jakarta go as high as Rp 5,000 per km with both providers.

RISED recommended the government set the minimum fare for online ojek (motorcycle taxis) at less than Rp 2,800 per km because higher fares may chase away 71 percent of current customers, according to its recent survey of 2,001 regular users.

“Consumers are very sensitive in this ride-hailing business,” RISED researcher Rumayya Batubara said.

A trip of 8.8 km using a ride-hailing service now costs Rp 19,000. The cost may increase to Rp 27,300 if the Transportation Ministry were to enforce a proposed minimal fare of Rp 3,100 per kilometer, as reported by several media outlets.

In others words, the proposed fare would make customers spend an extra Rp 7,900 each day on fares, whereas 48 percent of respondents said they were only willing to spend an extra Rp 5,000. Twenty-three percent said they were not willing to spend any more at all.

“Thus, [the proposed] fare may cut consumer demand by up to 71 percent,” said Rumayya.

Economist Fithra Faisal Hastiadi pointed out that such a drastic drop was possible because 40 percent of motorcycle ride-hailing customers were lower-income individuals who earned less than Rp 3 million monthly – less than Jakarta’s minimum wage of Rp 3.9 million.

For such low-income customers, the proposed price hike would increase the cost of transportation from at least 19 percent to 27 percent of their monthly income.

“What’s clear is that this fare hike is politically incorrect,” Fithra said.

He added if online ojek demand were to drop, it would also reduce the income of local businesses such as eateries and retailers that use ojek to deliver goods.

In addition, Rumayya explained that the survey was RISED’s response to a lack of media concern over how the Transportation Ministry's plan to raise minimum fares, announced late last year, would affect customers.

The ministry’s land transportation director general, Budi Setiyadi, has promised that a regulation would be issued in March this year setting the ideal fare at between Rp 2,000 and Rp 2,500 per km, while the maximum would be Rp 6,000 km.

The ministry itself was responding to a series of rallies last year by ojek drivers who were demanding a minimum fare of between Rp 3,000 and Rp 4,000 per km because, they said, they could not live on the current rates.

However, Igun Wicaksono, a spokesperson for the rallying drivers, recently said that drivers were willing to accept fares of between Rp 2,500 and Rp 3,000 per km.

Zumrotin K. Susilo, a former Indonesian Consumers Foundation (YLKI) chairwoman, said she concurred with Rumayya and Fithra on the detrimental impact of the proposed rate hike on lower-income consumers, but she also expressed sympathy for the drivers.

She estimated that a fare increase of 20 percent from Rp 2,200 per km (RISED’s benchmark fare) to Rp 2,600 per km would be fair to both customers and drivers.

More critically, she said the government should require ride-hailing platforms to provide health and work insurance for drivers, which would improve their welfare without burdening the customers.

“The problem is that the government is chasing the customers. It should chase the providers instead,” she said.

Go-Jek and Grab, which form a duopoly in Indonesia’s online ojek market, have so far avoided paying drivers insurance and fixed wages by labeling them “partners” instead of employees. As employees they would receive compulsory worker protection under the 2003 Manpower Law.

Go-Jek spokesman Michael Reza Say told The Jakarta Post his company calculated fares based on consumer-side data such as purchasing power, buying behavior and geographical demand.

“For the drivers, we provide competitive rates, incentives for the hardworking ones and other benefits,” he said.