OPINION: Surge pricing will help airlines. Just witness Air India’s rather uncharacteristically cheeky ad inviting passengers effected by the sudden sharp hike in rail fares to opt for its services instead, or Spicejet CMD Ajay Singh, saying that surge pricing in Rajdhani and Shatabdi fares will positively impact Indian aviation.
Now that may not have been railway minister Suresh Prabhu’s intention at all when he announced that India’s premier trains – Rajdhani Express, Shatabdi Express and Duranto Express, would have surge pricing with immediate effect. But the intention was clearly not to help those travelling by these trains, in fact charge them a lot more.
According to the formula, with even 40% of the train empty, passengers in some cases will pay one-and-a-half times the base fare. Once half the tickets are sold out, fares will shoot up 1.5 times of the previous base fares in the premium trains. In a statement, the Railways has claimed that 142 trains (mainly high-end) out of about 12,500 total trains.
This however is again hitting at the middle income Indians most, already feeling the squeeze of static incomes and inflation. A comparison of air fares on some of the routes indicates that flying is cheaper.
Also most importantly, Indian Railways is a state monopoly. Surge pricing only works in a competitive arena. Surging prices indicate a need for more supply, which get the price back to its original level. That is not the case with railways. It gets to set whatever price it wants, with little regard for responding immediately to surges or fall in prices.
IR had last year experimented with a dynamic fare system for peak season trains dubbed Suvidha, which showed that it’s abuse of monopoly powers.
|Once half the tickets are sold out, fares will shoot up 1.5 times of the previous base fares in the premium trains|
Indians have responded angrily, and not without reason. They see dynamic pricing in airlines and cabs, and in both, there has been drastic reduction in what they end up paying. In cities, many have shifted to using cabs from not just autos, but also their own cars. And yes, better pricing has made the fastest growing major aviation market globally. Notably, both sectors are almost constantly innovating, not just in prices, but in the quality of services on offer, which get linked to prices. Crucially, in both cases, it is the private sector that is taking these steps.
Even though it has annual budget larger than some countries, Indian Railways is one of the worst performing railways globally. Even though it is world’s fourth longest railway tracks, most made under imperial rule, there has been little effort to improve efficiency and services. Yes, there have been statements of intent. But most Indian use Indian Railways not because they want to, but because they are forced to. However, wherever there is competition with roadways and airways, railways comes second best. Extremely poorly run, unclean, unsafe, unhygienic, with rudimentary facilities, the romance of Indian Railways may be only in the eyes of the misty eyed or downright dumb. It is painful experience for most regular users, who in the best tradition of mai-baap governance, are grateful for any little improvement.
As protests against the Railways rose, it issued a statement. IR says it subsidises passengers to the extent of 73 paise per km. “And as a result of this subsidization of passenger services, the Indian Railways bore a loss of ₹33,490 crore on coaching services,” the statement read. The passenger revenue target for the current fiscal is ₹51,000 crore as against ₹45,000 crore in the last fiscal. That the Indian Railways have always been a loss making enterprise comes as no surprise for any Indian. It is also incidentally the largest public sector employer in the world, with no need ever to make any cutbacks despite such massive losses.
More insultingly, it says, “Lower-end common man is not affected by this experiment. 99% of the trains which carry 99.35% of our passengers are not impacted by this scheme. For the common man, rail fares remain much more competitive as compared to road,” reads a portion of the statement. So those who are impacted deserve to be? Is that what Indian Railways is saying? All the three trains are quite full, which means the prices could more than double almost every time. A railway official said fares for Garib Rath or Jan Shatabdi trains which are used by the common man are not effected. Rajdhani or Shatabdi trains are generally patronised by those who can afford premier service, he said. Well, he may not have noticed, but passengers of the three train categories already pay more. No wonder the aviation sector is eyeing the expected bonanza coming its way with undisguised glee. The only thing going for the railways, demand still far outstrips supply – in all forms of transport put together.
Travel agents say surge pricing is likely to make the railway ticket tout the happiest guy around, noted The New Indian Express. The present booking system does leave a window open for corruption by ticket examiners and booking clerks. This is likely to get sharper under surge pricing. Vacancies, if they exist, may benefit TTEs who take a huge cut during on-the-spot booking in trains.
Indian Railways needs a huge shake up. We would suggest it needs privatisation, and decentralised control at the day to day level. Look around the nations which are regarded to have best railways – Switzerland, Germany, Japan, France, UK etc – they are operate in the private sector. Of course such a step could help the people, but no Indian government, past or present, has been much concerned about that.
The groundswell of public outcry may change that.
Musafir Namah Bureau