The Indian Railways (IR) is looking to slash fares by almost a third on certain sections of ten Shatabdi trains.
Under the flexi scheme, fares rise as seats get filled up on premium trains. But the reverse should also be true – they should fall when train occupancy declines.
The IR has now identified ten Shatabdis, whose fares for certain sections (parts of a journey — between stations) will be lowered.
This should ease off some pressure on the railways, which has been facing persistent criticism over fares under the flexi scheme.
The reduction will be done on those sections, where road transport has beaten the Shatabdi on timings and fare, luring away passengers.
A senior IR official has said this decision was taken after the same formula was implemented on particular sections of two Shatabdi trains earlier and on one, the occupancy rose dramatically.
This official, who requested anonymity, said the flexi fare scheme, which has been roundly criticised by Members of Parliament (MP) and the common man, is here to stay.
“The flexi scheme will neither be abolished nor extended and to offer some relief to passengers, the reduction in some Shatabdi fares is being done,” he said.
“Flexi fare impacts just about 0.35% of the total passengers travelling on the railways’ network on any given day and it managed to generate Rs 800 crore in additional revenue in the first full year of its implementation till August 31, 2017,” he added.
The cost of carrying passengers has been increasing each year for IR, with no increase in fares in almost eight years.
It’s also well known that freight earnings continue to subsidise passenger earnings and in the absence of political will to raise passenger fares, flexi-fares remain the only option to generate additional revenues for the IR.
But instead of getting bouquets for thinking up this scheme to boost revenues with minimum pain, one of the world’s largest transporters is struggling to please its critics with tweaks.
The IR had earlier also modified the flexi fare system, offering 10% rebate in basic fare on vacant berths or seats after preparation of first chart in these trains.
The latest tweak should ease passenger complaints on high fares.
The flexi-fare system was started in September 2016, egged on by the prospect of earning more revenue by smart pricing.
Under this system, the base fare increases by 10% with every 10% of berths sold subject to maximum ceiling limit of 1.5 times in classes second AC, sleeper, second sitting (reserved), AC chair car and 1.4 times in third AC class.
Vinayak Chatterjee, chairman of the Feedback Infra Group, says fundamentally, flexi pricing is a good idea, “Flexi works both ways (raising as well as lowering fares). What is the Tatkal scheme? This is also a flexi fare scheme, where passengers pay extra for booking tickets closer to travel.”
Chatterjee says occupancy of trains depends on several factors like seasonality, festivals etc. not entirely on fare levels.
Due to the hear over flexi fares, the IR began a study a few months back to assess if it can reduce fares on some sections of popular trains.
That is how the reduction on two Shatabdis came about.
Fares were slashed by about 30% on the Mysore-Bangalore section of the Shatabdi, which goes up to Chennai after IR realised occupancy on this stretch was below par.
Fares were slashed to just below those which Volvo buses were charging for the same route and the IR official said there has been a “200% jump in occupancy” because of this.
Similarly, on the Ajmer-Jaipur leg of the Delhi-Ajmer Shatabdi, only one in three seats were being filled.
But for the remaining journey, occupancy was well above 60%.
Fares were slashed by a third here too, but this measures hasn’t been as successful as the Mysore-Bangalore section.
So now, on the Ajmer-Jaipur section, the less premium Jan Shatabdi is being run with lower fares.
The railways cross-subsidises passenger fares through freight charges, which not only hurts overall revenues but also drives away freight to the road sector.
The loss on account of passenger fares (subsidy) for 2017-18 could be as high as Rs 39,000 crore, the official quoted above said.
A transport sector expert points out that instead of using flexi fares to raise revenues, the IR should cap the passenger subsidy.
He says, if the current subsidy of about 43% is lowered to, say, 35%, there will be several crore rupees worth of earnings boost for the IR, far more than flexi earnings.
After all, if the government can seek give-it-up in other sectors like oil and cooking gas, why not the railways?
According to data from IR, earnings from passengers and other coaching declined by almost Rs 1.85 crore a day or by Rs 148 crore between April and June 20 this year.
While the earnings from these two activities were Rs 12,524.68 crore in the 80-day period in 2017-18, they fell to Rs 12,376.26 crore this fiscal.
The decline in earnings came despite an increase in the number of passengers booked.
The IR carried 1862.35 million passengers this fiscal against 1859.68 million in the same period last fiscal.
That’s an average daily increase of 33,250 passengers.
There is a popular misconception that the flexi fare scheme is similar to the surge pricing in airlines.
The railways does not increase fares based on how many people are trying to book a ticket.
Nor does it increase fares in most cases during festivals and seasonal rush — there is a ceiling up to which it will raise fares and not beyond.
Besides, the IR offers multiple fare and time options for passengers wary of flexi fares, in other trains.
These factors make the railways distinct from airlines, which have limited connectivity even today and do not offer multiple fare options on a given day.
Sindhu Bhattacharya is a journalist based in Delhi who writes on a range of topics in business and economy.