From UPSC perspective, the following things are important :
Prelims level : Flexi Fare System
Mains level : Not Much
During the eight months period from 1st July 2019 to 29th February 2020, approximately 28.93 Lakh berths remained vacant in Rajdhani, Shatabdi and Duronto type trains having Flexi fare.
What is Flexi Fare System?
- The flexi-fare scheme was introduced by the IRCTC in 2016 for the 142 “premium trains” such as Shatabdi, Rajdhani, and Duronto (now Vande Bharat Exp. as well).
- Under this dynamic pricing system, the base fare increases by 10% with every 10% of berths sold, with a limit set at 1.5 times the original price.
- The scheme was applicable to all classes, except AC first class and executive class. The pricing system is still in force.
Reasons for flexi fares:
- Indian Railways run about 12900 passenger trains per day and the railways is losing around more than 40% of what they spend on passenger trains.
- The trains like Rajdhani are the ones in which the elite class prefers to travel. So, some revenue can be garnered from them.
- The cost of service is almost double of what is being charged from the passengers.
- Freight business is already very expensive in India as compared to other countries in the world. Therefore, a further increase in this area is not feasible.
Issues with the system
- After the introduction of Flexi-fares, the railways lost 700,000 passengers in just 11 months while the additional revenue earned as a result of the scheme was ₹ 552 crore.
- While drawing upon the fundamentals of dynamic pricing, what Indian Railways failed to introduce was a simple principle that Flexi-fares work ways, hikes, and declines.
- The railways model just focused on increasing fares with no provision for a decrease in price when demand is low.
- While half of the decision-makers in the Railway Board support it, half of them oppose it stating that what the railways require is an increase in ticket prices across the board.