The Big Picture- Railway Flexi Fares: Why Is It Necessary?
The Indian Railways has come up with a surprise for the passengers travelling by Shatabdi, Rajdhani and Duronto trains by introducing flexi fares like in airlines. As a result, the passengers will be paying different prices for the same seats and berths depending upon when they book their tickets. The difference can go up to 50% of the original fares. On some routes these fares might turn out to be more than the fares in economy airlines. The 150 trains under the three heads account for 13 to 14 per cent of the Railways’ passenger revenues. According to flexi fare system only the first 10 per cent of seats and berths will come at the base fare, with 10 per cent increases for every batch of 10 per cent sold. The increase will be capped at some fixed limit of the base fare.
Reasons for flexi fares:
- Indian Railways run about 12900 passenger trains per day and the railways is losing around more than 40% of what they spend on passenger trains.
- The trains like Rajdhani are the ones in which the elite class prefers to travel. So, some revenue can be garnered from them.
- The cost of service is almost double of what is being charged from the passengers.
- Freight business is already very expensive in India as compared to other countries in the world. Therefore, further increase in this area is not feasible.
Impact:
- The total number of passengers which travel per year on Indian Railways is around 840 crores. Out of this half of the passengers are sub-urban people which are only a losing traffic. The non sub urban traffic is 380 crores. Out of this 230 crores are exempted from flexi fares because they are ordinary second class. The upper class is only 14 crores in total. So this concept is going to affect very few people at present.
- This system adopted by airlines as well takes care of yield management. It is important to see what the occupancies are. As the occupancies shrink, fares go up so that maximum yield per seat can be obtained on an average coach. This method is quite successful in airlines. When trains are full all the time, there is no question of yield management.
- The Rajdhanis and the Shatabdis are premium trains, which are favoured by the relatively better off. Those who plan their journeys later or in case of an emergency will be at loss.
Analysis:
An upper ceiling of the flexi fares has to be fixed. During festive seasons, airlines charge exorbitantly high amounts. This should not be allowed by railways being a government institution. Quality of services is these trains need to be improved as it is still not up to the mark compared to its international counterparts. Progress is there but still a lot more has to be done. More trains need to be run on flexi fares as the revenue generated will help in improving amenities for people.
It is important to note here that middle class and the upper middle class also travel by these trains. Unlike taxi, bus or air services, train services in this country are a monopoly. This experiment may be extended to include other long-distance trains in the future. A poor or a lower middle class person who decides to travel later should not be priced out by such a system by a monopolistic provider that aims to provide a public service.
This is not a precursor to privatization of railways though there are fears. Indian railways cannot be privatized because this is a system which joins the entire nation. If it is privatized there is a threat to the unity of the nation. However, some segments of railways may be privatized for better services to the passengers.
Conclusion:
In a nutshell, the person who reserves earliest will get the maximum benefit. The economic situation of railways is not very good. This is one step for a way forward. There is a need for tariff regulator for regulation on prices.
This system has to be evolved slowly and gradually. This is a slow medicine which needs time to work for railways and passengers as well. For now, it can be said that the concept of dynamic pricing is a commendable move by Indian Railways.
