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Can Surge Pricing Really Work For The Indian Railways?

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By Aditya Jha:

Indian Railways is a topic of great depth and curiosity. Not only has this mode of transportation been around for more than a century but it is perhaps the most effective and efficient mode of transportation that you can rely upon – even in the times of peak rush.

Summers being a time of the year when this rush reaches a whole new pinnacle and utter chaos, it was at this time of the year that I first boarded the Bihar Sampar Kranti – a train that is the most popular on the extremely busy route of New Delhi to Darbhanga, which is testimony to huge rush all through the year and more so during the one and a half months of summer vacation.

Just as I stepped into the New Delhi railway station to board the train, I was welcomed by a heavy rush of people that was going in all the directions – with their heavy backpacks and suitcases running from one end of the station to another; the whole scenario looked unreal and daunting for someone boarding his first train. Getting a coolie and finding your train is just one of those difficult challenges you face in the bid to board your train on time. It’s passing these little challenges that finally gets you onto the great Indian railway – which gives you a sudden realisation that while the times have changed since the British ruled us and introduced railways into India, the quality of railway still hasn’t.

The bogies are often clean but the basic necessities that you get ( a pillow and a blanket) are often dirty and leave a boarding passenger unsatisfied with the lack of infrastructural improvement. The biggest of the problems on this route is that people keep pulling the chain unnecessarily when their villages arrive, which leads to an utter mess for the fellow passengers and if that isn’t enough, the delay during the night hours (from midnight to 6 am) often leads to a minimum of 6 to 7 hrs due to countless reasons.

While we’re focusing on the drawbacks of the Indian railway, it is at this juncture that we must put into argument the newly introduced flexi-fare system (and might we add an ‘experimental surge pricing’ measure), which has been brought in with the intention to improve the Indian Railway infrastructure, as pointed by the Indian Railway Minister in Suresh Prabhu.

For a common man reading this article who has been travelling in Indian Railways for at least a few years, it’s hard to understand where the Indian Railways have gone wrong. To a layman, the topic of finance and budgetary support of Indian Railways will seem like the only concern but what we’ve to understand is that we aren’t a small country after all and to connect the whole country better, we need to work on and develop the number of trains we have.

Revolutionising the Indian Railways can’t just be done through the support of the annual budget, it needs something more and ideally, it needs strong FDI backing but that isn’t the case at this point of time. I feel finding a private backing to support the venture of Indian Railways, a sector that has often not seen the light of the day in terms of making huge profits, will be difficult since no investor will be willing to take a long-term risk on improving quality of railways and that too without any assurance of getting any profits on the same.

If we try to compare the scenario of railways in India to that of countries abroad, we might get a sense of what the Indian railway ministry can do without creating a hole in the pocket of the travelers who board the Indian Railways consistently – at least once or twice a month – as they can expect an increase in their spending on railway tickets to go up (this varies in all the 3 trains). Rajdhani and Duronto tickets will cost 42-43% more and Shatabdi fares will see a comparatively lower surge with 33% increase.

If we take example of Rajdhani Train from New Delhi to Ahmedabad, the 3rd AC fare is 1600, the 2nd AC is 2200 and the 3rd AC is 2500 – for a common man, the existing fares are not cheap and an increase of at least 10% of the existing fare will in itself leave the passengers with a hole in his pocket.

To understand whether this enrollment scheme makes sense, let’s take the example of United States – which has one of the world’s strongest infrastructural railway system. Going to the website of Amtrak to book a railway ticket from Washinton to Miami, the fare breaks up to $98 for a Value Seat, which comes in with 2 bags storage facility, 100% refund in case of cancellation and Wifi wherever available. If we convert $98 to INR, the total cost is approx. 6000.

Drawing a comparative analysis gives us clear figures. Tickets range from 2135 to 4855 (3rd AC to 1st Class coach) from New Delhi to Howrah, where the surge pricing is maximum. The Indian rider spends only a thousand rupees lesser than what a traveller in the United States spends – it makes me wonder – is it really amicable of the government to implement such surge pricing in a country like ours!

From the perspective of the government, no new trains can be bought unless there’s surplus of money on the annual revenue from the railways – thus, the Indian Railways, in theory, wants to improve the quality of trains which essentially means, getting new trains a few years down the line and enabling the riders to reach their destination in much quicker time.

The average Indian population is nowhere as rich as the average population in the United States – asking the lower middle class and the poor to pay Rs 4000 for a railway ticket is not only beyond the reach of their pocket but also unfair as this is not the large bit of the population that complains about 1) quality of train 2) travel time and 3) infrastructural development. It’s the middle class and the upper middle class that want a change – which gets us to the concluding point of this article.

In our research, we found that the railway ticket from New Delhi to Ahmedabad costs Rs 2000 for 2nd AC and it was during this research that we found that a few flight tickets for the same route cost only Rs 2000. Considering that the flight tickets have got a heaps lot cheaper than what they used to be just around a few years back, there are a couple of things to consider – both from the perspective of the Indian Railways and it’s riders.

1. Can surge pricing really work for a government run transportation system that faces stiff competition from revenue making private firms in the airline business, which saves time and is more efficient in terms of service and travel time?

2. Is it fair to say that for the infrastructural growth of the railways, the involvement of private sector and FDI is the way forward, instead of pitting consumer against railway vs airline war, in which the latter is bound to come out as the clear winner! In a scenario such, is surge pricing only going to throw railway in shackles instead of spurring improvement?


Image source: Smeet Chowdhury/FlickR
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