Indian Railways: Dynamic pricing on the nation's transporter would need strong rationale

Railways has been the cheapest, quickest and essentially the most preferred mode of transport. Unlike airlines, wherein prices vary depending upon, well various factors, Railways has had a mandated rate with prices depending upon distance and the type of travel such as non-AC sleeper, AC chair, third AC and so on. However, this is about to change, at least for Rajdhani, Duronto and Shatabdi. A new announcement reveals the surge pricing strategy by the Indian Railways for the above mentioned premium trains. Passengers travelling by Rajdhani, Shatabdi and Duronto will pay somewhere between 10 and 50 percent more under a dynamic surge pricing system starting 9 September. So, after 10 percent seats sold at regular fare, the prices will go on increasing by 10 percent every 10 percent of berths sold till it hits a ceiling of 50 percent. This would mean a New Delhi-Mumbai third AC fare for Rajdhani, which is Rs 1,628, will go up to Rs 1,791 with 10 percent increase and all the way up to Rs 2,279 with maximum 50 percent increase. Surge basically is an effective mechanism that essentially works according to demand and supply. For instance, when there are more people looking for taxi rides and there are fewer cabs in that particular area, price increases. Once there are sufficient cabs, the price goes down. All businesses vary prices depending upon the situation. If seats are not filling up, businesses drop prices. But in a high demand route, businesses still have the option to keep the prices high. This applicable only when there is enough supply. When one sees people aren’t buying tickets, then there can be algorithms to help you reduce the pricing to encourage people to buy. On the other hand, there are trains like Duronto, which are high demand and high cost, and subsidize rates for certain areas. So, there needs to be a balancing factor too. Nikhil Pahwa, Indian entrepreneur, founder of Medianama and Savetheinternet.in volunteer, tells us, “Surge pricing for trains could mean some people who need to travel to a location, may not be able to do so because they can’t pay the surge price. While I understand, it is fine to have this when there are multiple suppliers, but govt is a monopoly. And, this may not be great idea. In order to be fair and actually bring prices down, any surge pricing has to be coupled with increase in supply. " Traditionally, the government doesn’t deploy additional trains if there are lot of people waiting to buy ticket. The surge pricing concept has to come in with a rationale behind it, which looks at demand and supply, and not just making money, but more importantly people’s needs are met for travel. The government’s aim is to make Rs 500 crore more during the current financial year. Pahwa adds, “Now, we need public service to be profitable so that they can work on enhancing the capacity and so on. There is nothing wrong if they make money. The aviation policy that came out charging a cess on popular routes, so that govt can balance it out by subsidising tickets to smaller towns worked well. As a user it hit me, but this actually might encourage people in smaller towns to take flights because they are cheaper. There are different rationales behind making these choices. " Meanwhile, the surge pricing issue has already turned into a political hot potato, with many accusing the announcement anti-people, outrageous and so on.