Insights into simplifying train travel

Does Surge Pricing model make sense in the context of Indian Railways?

Taking a leaf from the world of airlines, and taxi aggregators such as Ola and Uber, the Indian Railways rolled out the surge-pricing model from September 9 2016. The price surge will be effective on Rajdhani, Duronto and Shatabdi trains across India. The ticket price shall increase by 10% on the base price with every 10% of tickets sold.

The Surge Concept –

Surge pricing is basically a tool to manage the supply-demand dynamics. Generally, as in the case of airlines & buses, it helps in driving higher sales by preponing a purchase decision. In the case of Ola or Uber, it helps increase the supply of drivers or reduce the demand from passengers at peak hours of the day.

What does surge pricing on Indian Railways achieve?

For a utility service like train travel provided by a government monopoly, where demand far exceeds supply, surge does not achieve much except for increased revenue. Simply put, it is a complex way to increase fares. We do not expect this to have any measurable impact either on the dynamics of demand or on the supply.
In any case, 90% of the travellers will pay more. Factoring cancellations, the number would be closer to 100% paying a higher fare. A simpler way would have been to go for a flat increase of say 25% across these trains. This would have spread (a slightly lesser) burden evenly across a greater number of travellers, without the added anxiety and tension of booking early. In a routine, Many trains get sold out within hours of booking opening date, and it is better if the passenger later in the queue does not have to pay a penalty for his/her delay.

Few points to ponder upon:

1. Sleeper class ticket prices will get affected because of the introduction of surge pricing – while those of First AC and Executive class have been exempted. Shouldn’t it have been the other way round? There are just few sleeper coaches on these premium trains, so revenue-wise not much is going to come out from Sleeper Class travellers. However, this is surely going to draw a lot of criticism – which is not worth the increase.
2. The timing could not have been worse. We are moving towards the festive season and for many travellers, it is going to hit their pockets hard. Couldn’t this have been started after the festival season?
3. Expect big arguments happening at the railway reservation counters as many train travellers would not understand and have a rational view of a sudden on-the-face price increase. The demand-supply being the deciding factor, pricing is going to be super volatile.
4. On the positive side – we expect this to dampen the speculative booking phenomenon, which RailYatri.in had predicted earlier.
5. It is typically seen that the first 10% of the tickets are booked by the tout community – especially in the peak rush season. Aren’t we encouraging them to book early and increase their demand?
6. Introducing dynamic fare prices on just these 3 types of trains is not going to move the revenue needle much for the Railways. After all, there are only about 300 of these premium trains in all. So we can safely guess that this scheme will get introduced on other trains too.
Perhaps, it is a precursor to the introduction of dynamic pricing in many more trains, in the coming time.


8 thoughts on “Does Surge Pricing model make sense in the context of Indian Railways?

  1. Mohan Ranade

    Surge pricing introduced in three types of super express trains, appears to attract criticism, as I find it the way of hiking tickets without any other benefits. This policy needs reconsideration immediately.

    Comment
    1. Dr.Graham Daniel

      Railways a much preferred mode of public transport must refrain from fleecing common man in the name of dynamic pricing. More so when the budgetary constrants are poised to go away in the near future. This huge public sector undertaking should remain a non profitable one always

      Comment
  2. Ravindra.Matey

    Even If I support for surge pricing, the base of 10% is thin, it should have been started beyond 50-60% of tickets sold, as first 10% are sold on opening day by long range planned traveller, but it’s again expected that half of them cancels for one or other reason. Surge pricing will help to get tickets for last minutes traveller along with Tatkal

    Comment
  3. Debanjan

    Indication is that,in the near future, railway is going to introduce the same policy gradually in all mail and express trains. They are making a fool of common citizens.

    Comment
  4. Ramanujan

    10% of the seats get booked in the first 1 hour. Does this mean all others have to bear the surge? What happens to all the quotas? Will there be surge in these too. When cancellation happens, should the next person pay more? The decision needs to be withdrawn immediately. It would be better if the takal charge is hiked.

    Comment
  5. Rajesh Tiwari

    Surge pricing scheme is forcing middle class passengers to travel only in sleeper class only. Who knows, in the future, such a scheme may be introduced in all trains forcing the common man to travel in general coaches.Is this how railways wants to modernize the system? To me, it seems like a policy to privatize railways from being a public property. It is just a way to fulfill all the financial targets that railways have. If at all railways wants to increase its revenue, the freight rates should be increased rather than introducing such a scheme. Rail fares should always fit the common man’s pocket.

    Comment
  6. Imran khan

    Premium loot by railway, by this railway have shattered the hope of passengers to travel in the these trains especially rajdhani express. I suggest railway should roll back and provide “acche din” to the passengers.

    Comment

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