Rail surge' pricing a bad idea, scrap it

The announcement on Wednesday of an approximately 50 per cent hike in passenger fares for AC2, AC3 and sleeper class travel in the Rajdhani and Duronto trains, and a similar hike in AC chair cars in the Shatabdi Expresses, is clearly a perverse model of revenue generation. It doesn’t really do much for railway finances. That may have been cited as an explanation — even if an unpalatable one — if a significant yield in earnings was to be harvested. Top Railway Board officials have put out the estimate that the virtual beggar-the-passenger scheme will produce at best Rs 500 crores more from ticket sales from these trains when the Railways’ attempt is to raise passenger earnings from Rs 45,000 crores to Rs 51,000 crores in this financial year. On the other hand, the misconceived hike brings AC2 and AC1 tickets within touching distance of one another, practically removing the rationale for AC2 travel.

This is the case in certain important sectors on which the Rajdhanis run. Seen on another plane, the hiked AC2 fare may be the same, and probably in some cases slightly higher, than what budget airlines offer. It is not clear if the Railways have taken a conscious decision to incentivise air travel. The hike plan that has been put out has the stamp of officialdom all over it; it cannot have been the brainchild of transport economists or careful business planners and deserves to be thrown out lock, stock and barrel. In effect, it seeks to trade on lack of options — in other words, on people’s miseries. All the three types of the so-called luxury trains run packed. Tickets are sold out practically within hours. Under this anti-people scheme, after the first 10 per cent of tickets are rolled out at the base rate, the remainder will be under the hammer for extortionist rates.

The Railways wish to make a quick buck, confident in the knowledge that it will be difficult for passengers to migrate to air travel as there simply aren’t that many flight tickets to be had in the budget range.  The authorities are taking advantage of the fact that this is a case of inelastic demand. The government, which owns and runs the Railways, may have forgotten that it’s not the moneybags who travel on trains, but normal middle-class people who are taxed at source, people who are the most conspicuously taxed in India and are hit hard by direct as well as indirect taxes of every description. Knowing that there exists a huge unmet demand for this category of trains, it was possible to raise the fleet and even cut fares somewhat in order to profit from volumes. Instead, while AC2, AC3 and sleeper fares will jump, AC1 will not be touched.