Sep 12, 2016

Railways' surge pricing follows slump in revenue

The Railways' revenues were 12.65 per cent lower than its Budget target of Rs.73,713 crore for April-August this year.

The Indian Railways' decision to experiment with surge pricing for passengers on its premium Rajdhani, Duronto and Shatabdi trains could have been triggered by its financial performance in the first half of this financial year, with gross earnings declining five per cent to Rs.64,387 crore in April-August compared with the same period of the previous year.
The Railways' revenues were 12.65 per cent lower than its Budget target of Rs.73,713 crore for April-August this year, official documents showed.

The total number of passengers carried by the Indian Railways in this period remained almost stagnant at 343 crore — a 0.34 per cent rise from year ago period. In fact, the fare increase comes when the number of passengers travelling in non sub-urban trains went down by 0.60 per cent so far this fiscal year. The suburban trains, on the other hand, saw a 1.16 per cent rise in traffic in the period.Freight earnings

However, the primary reason behind a fall in gross earnings is attributed to its freight that accounts for almost 65 per cent of Railways’ revenues. The freight earnings dropped 9.68 per cent from Rs.45,370 crore in April-August 2015 to Rs.40,980 crore over the same period this year.

The Indian Railways runs around 12,000 trains with 22 million passengers and operates 8,000 trains to ferry around 3 million tonnes of freight per day.

Railway Board Member (Traffic) Mohammad Jamshed had said that it is looking at “each single penny that can make Indian Railways more viable,” highlighting that it spends 73 paise and gets only 34 paise in return. He said the Railways incurs Rs.33,000 crore on passenger segments each year in a bid to meet its social service obligations.

The Railways has introduced surge pricing, whereby fares will increase with every 10 per cent of the tickets sold in Rajdhani, Duronto and Shatabdi trains. It will translate into a 30-40 per cent fare hike in such premium trains and may fetch Indian Railways Rs.1,000 crore every year.Following airlines

“The Railways is trying to test markets by introducing surge pricing that has been followed by railway networks globally,” said former chairman of Railway Board Arunendra Kumar. “Although the move may not significantly shore up the revenues, it will test the public response to surge pricing that airlines already follow without any cap.”

Former Railway Board Chairman S.S. Khurana welcomed the move and said the Railways is trying to address its “financial deficiencies.” “When freight revenues are also decreasing, the Railways should look at non-conventional methods to earn revenues. It’s a clear indication that the Railways wants to become a viable organisation,” he said.
Source - The Hindu