Surge pricing doesn't account for demand, supply
The Indian Railways has in their infinite wisdom decided to mop up an additional Rs 500 crore annually by announcing a form of surge pricing. Which is a roundabout way for the Railways to effectively increase the ticket prices of half the tickets sold on premier Express trains by 50 per cent. The rationale used by the Indian Railways is that consumers have 'accepted' surge pricing charged by taxi operators so they will be open to accept surge pricing on trains as well. That logic is flawed by a simple argument, when it comes to taxi operators, it is a private marketplace where consumers have a choice of operators. If a consumer does not like the charges being levied by operator A, he or she could always opt for another operator B. On the Railways front, there is often no other choice but to take a train. Indian Railways is a monopoly. While officials could well argue that half the tickets are still lower than the maximum fare, only 10 per cent of the tickets will be sold at the lowest base fare. There may not be a huge demand for train seats currently, but come the festive season in a few weeks where millions of Indians will try and make their ways back to their hometowns to spend time with their families this could have a devastating impact on the salaried class who use such trains.
Of course, there is another choice, that is to fly given that such Premium Express trains operate between major cities. While air fares also tend to shoot up during the festive season, on regular times fares on a sector like between Delhi and Mumbai are comparable to train fares and even lower in some cases. Sure, the meals may not be free and flying in a cramped seat may not match the comfort of sleeping in your own berth, but trains just cannot compete with planes when it comes to time. Why take a seventeen-hour Rajdhani between Delhi and Howrah when a plane will deposit you in two hoursIJ Especially if the costs are more or less the same. There is no doubt that the Indian Railways needs every penny it can get to fund their ambitious expansion over the next decade, particularly with regard to high-speed rail. But a across the board fare increase of between 15-20 per cent would have made more sense than surge fares and would have raised a similar amount of money. Maybe officials hoped that by wrapping an effective fare increase under the guise of surge pricing, a term that has entered our lexicon, public protests would be muted at this effective price hike. The public can protest by taking wing, literally. And airlines should be overjoyed.