New Delhi: Indian Railways needs revenue, no doubt, but can it afford to be selective about its customers?
This debate was sparked off by the flexi-fare scheme introduced by the national carrier in 2016 for the 142 “premium trains” such as Shatabdi, Rajdhani and Duronto. Under this dynamic pricing system, the base fare increases by 10% with every 10% of berths sold, with a limit set at 1.5 times the original price. The scheme was applicable to all classes, except AC first class and executive class. The pricing system is still in force.
The reasoning behind it was simple. Indian Railways carries around 8.4 billion people every year, according to railway officials. Of this, only 140 million would be impacted and they have the purchasing power to afford it.
Railways minister Piyush Goyal and his predecessor Suresh Prabhu have on several occasions supported flexi-fares stating that it is applicable only to those passengers who have the ability to pay. “Those who cannot pay, for them the trains are different and the fares are same for last few years,” Goyal said. They also argued that as the model of surge pricing has been used successfully by industries such as airlines, taxis and hotels, it only made sense for the railways to also do so.
However, while drawing upon the fundamentals of dynamic pricing, what Indian Railways failed to introduce was the simple principle that flexi-fares work both ways, hikes and declines. The railways model just focused on increasing fares with no provision for a decrease in price when demand is low.
“Railways is divided over flexi-fares. While half of the decision makers in the Railway Board support it, half of them oppose it stating that what the railways requires is an increase in ticket prices across the board,” said a senior railway official on condition of anonymity. Railway fares, he pointed out, are a political issue, with the national carrier having subsidized low fares over the years.
After the introduction of flexi-fares, the railways lost 700,000 passengers in just 11 months while the additional revenue earned as a result of the scheme was ₹552 crore. The Comptroller and Auditor General (CAG) in August said the flexi-fare decision was bad and that Parliament should ask the railways to review it.
The loss of passengers worried the railways and it appointed a six-member committee to review flexi-fares, which came up with several suggestions on how the pricing system could be replaced. The committee recommended that trains with shorter travel times charge higher fare. It also said special premium charges could be levied for overnight trains, discounts could be given for travel on trains arriving at odd hours. It also suggested differential pricing for preferred berths, e-auctions on popular trains and higher fares when demand peaks, such as during the festive seasons.