New Delhi: Indian Railways on Wednesday announced a dynamic fare system, similar to the one used in the aviation industry, for premium trains Rajdhani, Shatabdi and Duronto in a bid to shore up revenues. According to this system, the base fares of Rajdhani Express and Duronto trains will go up by 10% with every 10% of berth sold subject to a ceiling of 1.4-1.5 times depending on the class of ticket.

The cap comes into effect with half of the available tickets sold.

The national carrier, which cross-subsidises low-priced passenger tickets with revenue from premium services, has been too shy to raise fares, which has over the years affected its ability to make capital investments.

Wednesday’s decision for the dynamic pricing system based on demand for tickets in select trains follows the recent move to rationalize coal freight rates and efforts to increase non-fare revenue such as from advertisements on trains in a bid to turnaround the carrier. Railways had projected 12% growth in passenger receipts to 51,012 crorein FY17.

While the cap is 1.5 times the base fare for two seater, sleeper and AC two-tier classes, it is 1.4 times for AC three tier tickets in Rajdhani and Duronto trains. There is no increase in the base fare for First Class AC ticket.

For Shatabdi chair car tickets too, base fare goes up with every 10% of berths sold up to 1.5 times when half of the available tickets are sold.

“This is a well thought out market savvy measure for revenue enhancement. This helps the Railways in raising revenue from premium passengers who value services and are willing to pay for it. The cap on the fare will ensure that Railway fares will still remain competitive compared to airfare," said Manish Sharma, partner, capital projects and infrastructure at PwC India. Sharma said the national carrier has been making investments in infrastructure which needs to be sustained.

“The changes in fares shall come into force from 9 September. Revised fares will not apply to tickets already issued in advance for journeys to commence on or after 9 September," the Railways said.

The move to enhance passenger revenue also coincides with the data released on 1 September that the economy expanded by 7.1% in the first quarter of the fiscal year, its slowest pace in six quarters, signalling that revenue from freight was possibly subdued in the quarter.

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