By Jatin Bavishi
Railways invoke mixed emotions in most Indians. While it effectively fulfils a great social purpose of connecting the soul of the country, it has done so with foul smelling compartments, bad quality food, and incessant delays in arrival. The problems of the Indian Railways (IR) are well recognized, but the unanimous defence given by the management is that the sector is crippled financially. Politicians in the past have felt shy of raising fares in order to prevent political backlash. The current Railways Minister, Suresh Prabhu, however, has come up with innovative ways to generate resources without tinkering much with the basic operations.
The flexi-fare regime
The IR have reportedly earned an additional revenue of Rs 540 crore in less than a year through its flexi-fare scheme. This was higher than the Rs. 500 crore which was expected. The scheme, launched on September 9 last year, is applicable in 142 premium trains: the Rajdhani, Shatabdi, and Duronto Express. This scheme allows only 10 per cent of the seats to be sold at the normal fare and thereafter it will go on increasing by 10 per cent with every 10 per cent of berths sold with a ceiling of 50 per cent. Only the aggrieved can know the agony of booking tickets via Tatkal in these trains (the provision which allows customers to book tickets a day before the journey, charged at a premium). To improve on this, in December 2016, some additional changes were inducted in the flexi fare structure to attract last minute travellers and introduced a range of discounts.
Money making scheme?
Some people have contended that this is a complex way to make the IR divert from its core principles of public utility. The flexi fare is just the base fare, exclusive of other charges and taxes. What it also means is that those buying tickets after the first 40% tickets have been sold, will have to shell out up to 1.5 times the original fare without any concomitant value addition. The IR have contended that this pricing policy is akin to surge-pricing followed by cab aggregators and airlines. However, it is not exactly the case since prices only move one way here, that is upwards, irrespective of the demand. Moreover, even if the coach is only 51% full at the time of departure, the prices will still climb to 1.5 times the normal fare for the marginal passenger.
Controversially, the flexi-fare scheme applies to all classes except the air-conditioned First Class and Executive Chair Car where the ticket prices will remain untouched, a move that has been criticised by some, questioning the rationale of leaving higher-fares untouched.
The move has reduced the gap between airfares and the rates of these premium trains. This also comes at a time when the Prime Minister is touting airline connectivity for the remotest areas and marginalized sections. Already under the Ude Desh ka Aam Nagrik (UDAN) Scheme, affordable regional connectivity has been envisaged.
The regime of cross-subsidization
Defending the move, Railway Board Member (Traffic) Mohammad Jamshed said that train travel is still the cheapest mode of transport in the country compared to air or road. At present, we are facing a loss of Rs 33,000 crore in the passenger segment as we charge 36 paisa for one km of travel, Jamshed said to Scroll.in. Also, the IR follow cross-subsidization of passenger fares by charging higher from freight. You cant have a healthy entity when freight, which makes up for two-thirds for railways earnings, is exorbitantly priced. Roads will take over sooner or later if this continues, Jamshed adds.
Modernizing the stations
The flexi-fare scheme is part of larger plans for the IR. The Railways Ministry has approved the Station Redevelopment Programme (SRP) in which 400 stations have been identified for modernization. Some private sector companies, foreign governments as well as large public utilities have courted interest in this ambitious plan, which is estimated to have a budget or Rs. 1 lakh crore. The logic behind it is to give stations an airport-like feeling. Various other ways have been roped in to monetize the sector. The question is whether railways would abandon its social objectives in pursuit of profit.
Soul-searching for the “it” factor
Certain aspects of the current move are desirable. It allows infusion of non-debt creating capital into the sector. It also allows the government to transform the railways from a mass-carrier to a strategic partner facilitating Indias growth story. There is, however, a certain nuance that must be appreciated. The IR should not cease to exist at a low-cost travelling medium for the masses. Currently, an average passenger pays only 53% of the costs and is subsidized from freight. Rationalization of passenger fares would help in the crucial modernization of the sector, but it would definitely pinch the poor.
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