An announcement from the Indian railways to introduce surge pricing in its three premium trains — Rajdhani, Duronto and Shatabdi — from 9 September has stirred a hornet’s nest.
Passengers, political parties and analysts have unanimously opposed the rail carrier’s decision saying it is an anti-people move and will burden the common man for whom railways are the cheapest mode of travel across the length and breadth of the country.
But, on a closer look one can understand why so much public clamour on this is unwarranted and why the railways is indeed doing the right thing by experimenting with fare hikes in its long-distance premium trains. Remember, even after the hike, Indian railways remain one of the cheapest mode of land transport for the common man.
Firstly, let’s look at what really the railways did.
Taking cues from the aviation sector and app-based taxi service providers, the department said on Wednesday that flexi fare pricing (in reality surge pricing) will be introduced in these three trains based on which the final fares will increase by 10 percent with every 10 percent of berths sold.
It means except those who book early, others will have to pay a premium to the floor price of the ticket. Before looking at the details, let’s get one thing clear. What railways has done is, in effect, a steep fare hike.
There is hardly anything ‘flexible’ about it. The simple reason is except for the first 10 percent (where the basic fare will be applicable), the remaining tickets that constitute about 60 percent of the total will now comes at up to 1.5 times of the basic fare. This is before adding other charges applicable on every ticket above the base fare. Hence, what has happened is a direct hike in fares for majority travellers.
But, still this shouldn’t be a big deal to the common man. Why?
The impact on the common man is minimal. There are no changes in fares in the unreserved segment that are used by majority of the aam aadmi. The fare changes are brought in across the 2AC, 3AC, chair and sleeper segments. There are only 42 Rajdhani trains, 46 Shatabdi and 54 Duronto trains as of now, which normally accommodate the high end of the passenger segment and constitutes only a small portion of the 2.3 crore passengers using the railways every day.
There is no hike in fares of trains like Garib Rath and Jan Shatabdi, which are more used by the aaam aadmi. Also, the department has kept out the 1AC and EC class since the fares there are already high and often at par with that of budget airlines, hence the argument that it will push the customers to opt for budget airlines is flawed.
If a 1AC passenger were to move to budget airlines, he would have already done so. In short, the affected passenger segment is less than a percentage of the total count, unless the railways plan to extend the fare hike to other trains as well. But, for now, it is limited to these three. The railways is likely to review the experiment after a while and, if found not a feasible proposition, might even roll back the hike.
But, ideally the railways should go ahead with the fare hikes without succumbing to the public pressure. Here’s why.
At some stage, the railways needed to take the bitter pill of reforms to address the disparity in the passenger fare segment compared with the freight. It’s high time railways stopped the longstanding practice of cross subsidising the passenger at the cost of higher freight rates. While railways’ primary mandate is to make cheaper travelling possible for the common man, it is in the interest of the public that railways remain operationally viable to stay here for long.
The carrier has been suffering heavy losses in the passenger segment all these years. According to information given by minister of state for railways Manoj Sinha in the Lok Sabha in April this year, total losses in the passenger segment stood at Rs 33,490.95 crore in the financial year 2015.
Currently the railways charge around just about 36 paise per kilometer from the passenger, which is the lowest compared to any other mode. For the fiscal year 2017, the railways has set a passenger revenue target of Rs 51,000 crore, as against, Rs 45,000 crore in the previous fiscal. Even if it succeeds in rolling out the “flexi” pricing scheme, it is not going to add more than a few hundred crores to its coffers.
The point here is that the railways has finally showed some guts to bring in reforms in the passenger segment, which is key for its long-term sustainability. There is a big danger in keep increasing the freight rates and subsidising the passenger for two reasons. For one, it will compel companies from opting for roads and ports abandoning the rail route to cut their costs, which will ultimately hit the revenue of the railways badly.
Secondly, every time when the railways hikes the freight rates, the cost is passed on to the end consumer by companies, ultimately impacting the end-consumer, the common man. As the junior minister said in Parliament, the railways has so far kept its tariff policy in favour of the common man, especially in the lower classes. Periodical increase in freights has compromised the competitiveness of the Railways with the other modes of transport, particularly the road sector, the minister had said in a written reply to Parliament.
Railway minister Suresh Prabhu has taken a bold step in kicking off an experiment phase in reforming the passenger fares. It might cause some short-term resentment among passengers as is the case with any fare increases.
But, the point not to be missed here is that for several years the governments have used railways as a tool to appease the public by poorly thought out tariff policies and causing much damage on the freight segment.
What Prabhu should do simultaneously is enhance the passenger experience by focusing on the safety, comfort and punctuality of train services. In his last railway budget, Prabhu had outlined his plan to improve the passenger experience such as building 17,000 bio-toilets in trains and 475 in stations this year and covering 400 stations with free Wi-fi access. If the department offers enhanced facilities for the passenger, he wouldn’t mind to shell out a bit more on the ticket on premium trains.
The bottom line here is: There is a good rationale, reform focus behind the decision of the railways in experimenting with a fare hike in select trains, which doesn’t really warrant the kind of public clamour that followed after the announcement on Wednesday. Let’s look at the larger picture and not overreact.