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‘Surge’ Pricing for Railway Tickets as Tax by Stealth
The Indian Railways’ implementation of the “surge” pricing of tickets for its fast trains is unfortunately an ill-conceived policy and a “tax by stealth” measure. It flouts basic microeconomic rationale and real-world relevance as the railways is a monopoly with no flexible and immediate capacity for a rise in supply of traveller coaches and/or fast trains.
The Indian Railways has introduced “surge” pricing of tickets for seats (other than first class air conditioned and executive class coaches) in fast trains, namely Rajdhani, Duranto and Shatabdi with effect from 9 September 2016 (PIB 2016). In this “flexi fare system” which is usually followed by airlines, the base fare of tickets will increase by 10% with every 10% of berths sold while the first 10% of the seats will be sold at the normal fare. Fares can rise up to a maximum of 1.5 times the original base fare. Once half the tickets are sold, the remaining tickets will be sold at 1.5 times higher base fares for second class, sleeper and two-tier air-conditioned coaches, and 1.4 times higher for three-tier air-conditioned coaches. Other supplementary charges such as reservation fee, superfast charge, catering charge, and service tax shall be levied separately. For tatkal booking, while no tatkal charges were applicable, the fares for seats booked under tatkal quota were 1.5 times of the base fares for all the classes, except first class air-conditioned and the executive class. The information that will be displayed to the passenger will be alerted during the booking process if the fare of a lower class of tickets becomes higher than the higher class to exercise options to travel by the higher class (PIB 2016).
Theory of ‘Surge’ Pricing
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