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Q. Dynamic fare pricing in railways: Comment on recently announced surge pricing (dynamic fare pricing) in high end trains.
Sep 10, 2016 Related to : GS Paper-3

Ans :

Introduction-

Recently Indian railways has announced dynamic fare pricing system in Rajdhani, Duronto and Shatabdi trains on experimental basis. Under the new dynamic fare system, usually followed by airlines, the base fare of tickets will increase with the rising demand. The new fare structure will, however, not be applicable to 1AC and executive class coaches. According to railways base fares will increase 10% with every 10 per cent of berths sold. The new system has equally found both supporters as well as detractors. 

Analysis-

  • New system announced on experimental basis will helps railways to shore up lagging passenger revenues. 

  • The cost per passenger kilometre today is around 73 paise, while the Railways recovers only 37 paise. This gap will be corrected through new system, without hurting lower section of the society. 

  • The system is applicable to only high end trains, which provides AC journey, which are generally used by well to do section of society, hence charging them does not makes much difference to passengers.

  • Generally, a relatively poorer person who makes a late decision to travel should not be priced out by such a system by a monopolistic provider that aims to provide a public service.

  • This fare increase in the premium trains for some classes could result in airfares being lower at certain times and routes. This could wean away some train travellers. 

  • Similarly the increase in the prices under the scheme begins much too early, when a bare 10% of the seats are sold. As a result, it puts far too much pressure on passengers to book early.Unlike other modes train services in the country are a monopoly. And it has underinvested in capacity and created a systemic shortage. The surge pricing route does not solve these issues.

Suggestions-

  • There is need of a robust component of fare-based revenue from passenger trains. It will help Railways to spend on infrastructure and amenities and focus on features such as safety. 

  • Similarly there is need to expand the scope of Tatkal booking, which is currently limited to one day before travel. A Tatkal scheme with flexible and cascading pricing coupled with an increase in the number of tickets will helps railways in enhancing its revenues.

  • Railways needs more revenue, hence they must find a way to increase revenue from passenger traffic if it is to convert itself into a healthy and self-sufficent organisation.

Conclusion-

Recently announced surge pricing by railways has created heated debate among many observers, as some supports this move and some oppose. Railways need to enhance its revenue to provide better opportunities, but it should be well though and planned mode. Hence railways should prepare a comprehensive and sustainable fare pricing system, and it should consider interest of both passengers as well as railways revenue.


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