Does surge pricing model make sense in the context of Indian Railways?

Why surge?

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 via preponing a purchase decision. In the case of an Ola or Uber, it helps increase the supply of drivers or reduce the demand from passengers at various hours during the day.

What does surge pricing on Indian Railways achieve?

For a utility service like train travel provided by a government monopoly, and with demand far exceeding supply, surge does not achieve much except for increased revenue. Simply put, it is a complex way to increase fares. It is fair to say that we do not expect this to have any measurable impact either on the demand dynamics, or on the supply.

In any case, 90% of the travelers 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 travelers, without the added anxiety and tension of booking early. Many trains routinely 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 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 travelers. However, this is surely going to draw lot of criticism – which is not worth the increase.

2.      The timing could not have been worse – especially as travelers are heading into a festival season. For many it is going to hit the pockets hard. Couldn’t this have been done started after the festival season?

3.      Expect big arguments happening at the railway reservation counters – we don’t expect many train travelers to understand and have a rational view of 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, a precursor to dynamic pricing in many more trains!