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Home > Business > Special

Green signals from a fare cut

A K Bhattacharya | July 22, 2003

Indian Railways has reduced fares. This may come as a surprise. But the fact is that in the garb of introducing a flexible tariff structure, it has actually cut the basic fares for first class and second class air-conditioned travel on the Rajdhani by as much as 10 per cent.

It is surprising because the Railways has been quite secretive about the initiative. There have been no advertisements before the fare cut. Nor has there been a post-reduction publicity drive through the media.

True, Railway Minister Nitish Kumar had talked about flexible fares earlier in the year. But surely there should have been some song and dance about the move, coming as it does in response to the stiff competition the Rajdhani first class and second class AC fares have been facing from the airlines.

A 10 per cent cut in the basic fares may only result in a small saving of Rs 200 to Rs 400 a passenger. So, the move may not immediately help the Railways retain the Rajdhani passengers it has been losing to the airlines under their apex fare schemes. The enticements offered by the airlines are far more attractive. Still, it is significant because the Railways has now established that it can and will respond to competition.

This is a welcome change. The Railways has never reacted to market developments even though it has been steadily losing freight to road transport. And of late, it has begun to lose even its premium class passengers to some of the airlines.

By effecting a cut in the basic fares through an executive order, the Railways has crossed another major hurdle. So far it was generally believed that the Railways could change fares only after obtaining Parliamentary approval, although there was no such constitutional requirement.

With the introduction of flexible fares in Rajdhani trains, the decks have now been cleared for further adjustments in fares of other premium trains like the Shatabdi. Already freight rates for different sectors have become flexible. So, the marketing of Indian Railways should see some more activity in the coming days.

Already, a major computerisation drive has seen considerable success in making railway tickets available through the Internet. On a conservative estimate, over 350,000 customers have so far used the Internet to buy railway tickets for their travel. This number is set to increase in the coming days as the service becomes more popular.

To buy a railway ticket now, all you need is an Internet connection and a credit card. There is no need for you to either get hold of an agent or queue up at a railway ticket reservation counter. All tickets purchased through the Internet are delivered at the address assigned by the customer. And if you do not have a credit card, you can pay cash when the ticket is delivered.

But just like the introduction of the flexible fare scheme for the Rajdhanis, the Railways has kept the newly introduced facility of purchase of tickets through the Internet a well-guarded secret.

The handling of both these hugely customer-friendly schemes would show that the Railways may be doing the right things to get a larger share of the market, but it is not doing enough of talking in the market place. And it is here that it might lose out to the more market-savvy private sector airlines.

There is, of course, much more that it can do to get more passenger traffic business. In spite of the best of intentions shown by most ministers, the Railways hardly focus on routes that might fetch them more premium passengers.

Expert studies have shown that if only the number of scheduled halts between Delhi and Mumbai are reduced to only one from the current four or five stops, the Rajdhani train can cut its travelling time by three or four hours.

This essentially might mean that a railway passenger can hop into Rajdhani at eight in the evening and reach Mumbai at eight next morning. At a fare that is less than half of the airfare, such a deal would be a clear winner.

There are many such other routes, where the Railways can bring about such minor changes and improve its passenger traffic business. But for that to happen, it must first realise that it is operating in a market where marketing its services is of critical importance.

It must also shed its old mind-set that it operates in a monopoly market and therefore faces no competition. That is no longer true. The Railways will have to increasingly compete with airlines particularly for its premium train passengers.

In short, Indian Railways needs to be corporatised.

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