After a passenger fare hike, Railways plans occupancy-based discount

Occupancy-based discount is an effort to augment revenue by increasing number of passengers during lean periods

After opting for a passenger fare hike starting New Year, Indian Railways is planning to come out with an occupancy-based discount system for passengers across mail, express, superfast, and premium trains. The discounts would be available on trains where occupancy rate is low.

This is seen as an effort to augment revenue by increasing the number of passengers during lean periods, on non-remunerative routes with a stiff competition from roads and some long-run trains having larger running time with more stoppages. 

“We are working on a slab-based discount model, which will be applicable on all trains where occupancy is an issue,” confirmed a senior official. 

According to the ministry, the average occupancy of different types of trains, including Shatabdi Express, on an end-to-end basis ranged between 70 per cent and 100 per cent in 2018-19. 

This will not be the first time that the national transporter is wooing passengers by doling out discount sops. It is already offering 10 per cent discount on vacant berths after the preparation of first chart in all trains. In addition, graded discounts are available in flexi fare trains where class-wise occupancy is less than 60 per cent.  

Higher revenue from passenger segment is vital for the Indian Railways that is struggling to meet its earnings target for 2019-20. As a step towards this, various initiatives for fair rationalisation are being planned by the Board and the recent fare hike was one such move. From January 1, the national transporter had raised passenger fares across classes ranging from 1 paisa to 4 paisa for every kilometre, excluding suburban and season tickets.

For April to November period, it has fallen short of earnings target by 12.28 per cent to around Rs 16,391 crore. Though the target for the period was Rs 133,482.68 crore, the earnings were seen at Rs 117,091.44 crore. Interestingly, this is almost similar to the last year’s earnings of Rs 117,655.01 crore. The hike was crucial for the financial health of the Railways, which was staring at a higher operating ratio too. “Such crisis will make an organisation stronger,” Railway Board Chairman V K Yadav told the media last week. Industry sources highlight that the hike was marginal as the financial impact was only a ‘minimal’ Rs 2,300 crore.

Interestingly, going for a slab-based discount approach may be a difficult task for policymakers, too, as demand is not uniform in the Railways — it depends on lean and peak periods, non-remunerative routes, distance, and timing of the trains.   

At present, graded discounts are given in Rajdhani, Shatabdi, Duronto, and Humsafar trains where class-wise occupancy is less than 60 per cent, four days prior to scheduled departure of train. Based on this model, 20 per cent discount is given for up to 70 per cent occupancy and 10 per cent discount between 70-80 per cent based on the last fare under the flexi mechanism. Beyond 80 per cent, no discount is provided. These initiatives were launched in premium trains after passengers started opting for airlines after the introduction of flexi fare system, leading to low occupancy in several trains.