Decoding ‘Surge’ pricing in Rajdhanis, Shatabdis and Durontos : All you need to know about this indispensable ‘bitter pill’

Railway Minister Shri Suresh Prabhu introduced the concept of ‘surge pricing’ or dynamic fares in the 3 categories of premium trains – Rajdhanis, Shatabdis and Durontos. The concept of surge pricing refers to an increase in fare for the same service as the number of remaining vacant seats decreases, and is followed by all the airlines and private cab operators like Ola and Uber. Let us see what is the concept of “surge pricing” or “dynamic fare” as implemented in the three premium categories of trains operated by the Indian Railways.

Which trains will have “surge pricing ?
The surge pricing is applicable in 3 categories of premium trains since 9 September 2016 – Rajdhani Express, Shatabdi Express and Duronto Express. Currently, there are 42 Rajdhanis, 46 Shatabdis and 54 Duronto Express trains operated by Indian Railways. Therefore, surge pricing will be applicable on only 142 trains (out of about 12000 trains operated by Indian Railways).

Which classes are included in Surge Pricing ?
Surge Pricing is implemented in tickets booked in Three-tier AC (3A) and Two-tier AC (2A) classes of the Rajdhanis & Durontos, and in AC Chair Car (CC) of Shatabdi Express trains. First AC (1A) of Rajdhani & Duronto, and Executive Chair car (EC) of Shatabdi are exempted from dynamic pricing.

How exactly does Surge Pricing work ?
To understand how surge pricing is working in these trains, please consider the example of New Delhi – Howrah Rajdhani Express. Assuming that there are 400 seats available for booking in the 3AC class and the base-fare of 3AC between New Delhi and Howrah is ₹ 1650. The total fare in these 3 categories of premium trains is base fare + catering charges. In Howrah Rajdhani, the catering charge is ₹ 250.For the first 40 seats booked, the fare will be the base fare, i.e. ₹ 1650 + catering charges ₹ 250, which means a total fare of ₹ 1900.Once the first 40 seats have been booked, the base-fare will increase by 10% for the next 40 seats. So, the fare for the next 40 seats will be ₹ 1815. The net fare will be the base fare + catering charges ₹ 250, that means ₹ 2065.

Similarly after 80 seats have been booked, for the next 40 seats, the base fare will again increase by 10%. This means the net fare for these seats will be ₹ 1650 + 20% of ₹1650 = ₹ 1980. The net fare can be calculated by adding the catering charge of ₹250.

With every 10% seats booked, the base fare will increase by another 10%. Finally, when 50% of the seats (i.e. 200 seats) have been booked, the remaining 200 seats will be base-priced at ₹ 1650+ 50% of ₹ 1650 = ₹ 2475. The net fare will be the sum of ₹ 2475 and ₹ 250 (= ₹2725).

The dynamic fares will be calculated in the similar fashion for 2AC and CC in other trains where applicable.

How does this benefit Railways ?
The above example of New Delhi – Howrah Rajdhani shows that just from the 3AC bookings per day in Howrah Rajdhani, Railways will earn ₹ 2,30,000 more than what it used to earn before the dynamic pricing. Overall, Railways will earn ₹ 600 crore in this fiscal year from the newly introduced dynamic pricing.

How does it affect people ?
On an average, everyday about 1,50,000 people travel in the 3A, 2A and CC classes on these 142 premier trains where dynamic pricing has been implemented. This is just 0.65% of the 23 million people travelling in Indian Railways. So, the dynamic pricing doesn’t affect even 1 % of the railway commuters. Also, people travelling by these premium trains belong to financially strong section of the society. Yes, the dynamic pricing will definitely affect people travelling in most of the East-bound Rajdhani Express (Howrah, Sealdah, Patna and Guwahati) as the rush for these Rajdhanis is very high and during peak seasons, tickets tend to get full within an hour once the bookings start.Despite the implementation of dynamic fare in these Premium trains, railways travel is the cheapest mode of transport in the country with the base fare of these trains hovering as low as ₹ 1.1 per kilometre, many times cheaper than the Volvo and luxury buses as well. For instance, the Volvo Bus (Haryana Roadways) between Delhi and Chandigarh cost ₹ 575 (without any food), the Shatabdi Express between New Delhi and Chandigarh costs ₹ 560 (with food and tea), which is much less than the volvo.

How has been the response ?
Indian Railways claimed that the response to dynamic fare has been good, and the earnings went up by ₹ 84 lakh on 9th September  (the first day of the implementation), followed by an increase of ₹ 81 lakh earning on 10th September.

With railways under severe financial crunch, there has not been any upgradation in infrastructure, investment and the development in this sector has been close to nil over the last decades. Due to successive governments not touching the passenger fare (in fear of losing votes), railways has been crumbling. Fare of goods trains were regularly increased to subsidize the passenger sector, due to which cargo has gradually moved to roads (aided by better road networks being constructed). One cannot rob Peter to pay Paul. This flawed populist policy since decades has suffocated railways and is responsible for its current condition.

Whether a uniform increase in the fares of premium trains where everyone pays the same amount would have been better than the dynamic pricing where someone will have to pay 50% more than the other just because he/she booked the ticket a few hours later can certainly be debated and discussed. But in no way can the fact be denied that an increase in fare of Premium trains was the much needed “Bitter Pill” to improve the health of the railways.

Kshitij Mohan