Railways suffers pricing jet lag

Rail passenger traffic takes a knock from its flexi fares and low-cost carriers

The Indian Railways is trying to battle it out with the aviation sector for passenger volumes. It has been hit by a decline in airfares and the adoption of a dynamic railway fare system. While from January to May 2017, domestic airlines posted a 17.63 per cent growth in passenger numbers, the railways saw only a marginal increase of 0.37 per cent.  

This comes at a time when the railways ministry has raised concerns over its passenger business in a blueprint drawn up by it. The national transporter is losing its premium passenger segment to the airlines. 

Passengers carried by domestic airlines during January-May 2017 were 46.59 million, against 39.60 million during the corresponding period of the previous year, thereby registering a growth of 17.63 per cent, according to figures by the Directorate General of Civil Aviation. On the other hand, the railways saw an average increase of 0.37 per cent during the same period.

According to media reports, the blueprint states that 25 per cent of domestic air travel is within 500 km, a segment where the railways used to have monopoly. Though the railways had been claiming that there has been an increase in the First AC, AC-II, III and First Class, which carries more than 145 million passengers every year, the percentage increase has been declining for some time.  On the other hand, the aviation sector is set to cross the annual 100-million passenger mark, soon.   For the railways, there has been an increase in the overall passenger revenue in April and May. During April, passenger revenue zoomed 10 per cent to Rs 4,057.79 crore, compared to Rs 3,684.14 crore during the same period last year. In May, the revenue increased by 4.9 per cent to Rs 4,192.8 crore, against Rs 3,998.48 crore during the same period in 2016.  

“The railways cannot be compared with aviation, in terms of revenue and volume. On an annual basis, we suffer a loss of Rs 35,000 crore on passenger services, owing to subsidy burdens. Operating cost on passenger services is increasing year after year,” said a senior railways official.

In order to boost its revenue in the passenger segment, the national transporter had introduced flexi fares on premium trains from September 9, 2016. “The dynamic fare pricing was a success. Additional earnings from flexi fares from September last year to June 30 this year in the premium segment stood at Rs 551 crore,” the official added.   

Responding to a question in the Lok Sabha on whether flexi fares diverted traffic to the aviation sector, the railways ministry responded last week: “In view of the variable fare structure, the fares may or may not be higher than airfares. The system is only in Rajdhani, Duronto and Shatabdi trains. Other mail, express and superfast trains are available under the normal fare structure. It cannot, therefore, be said that this mechanism has diverted traffic.”  

The aggressive measures of the aviation ministry like UDAN (Ude Desh ka Aam Naagrik), too, are raising hackles of the railways. The scheme will make air travel cheaper to as low as Rs 2,500.