New Delhi: The Indian Railways has decided to scrap its flexi-fare system (surge pricing) in trains with less than 50% occupancy and reduce the flexi-fare mark from 1.5 times to 1.4 times the full fare, calling it a festive gift to its millions of passengers.

Railway minister Piyush Goyal tweeted, “Win-Win situation: the reduction of flexi-fares is going to benefit both the passengers that can now avail tickets at cheaper rates as well the Railways that will see a surge in demand and occupancy."

Flexi fare is a surge pricing system introduced by the railways in September 2016 in premium trains like the Rajdhani, Shatabdi and Duronto. Under it, 10% of the seats were sold in the normal fare at the beginning, and the fare kept increasing by 10% with every 10% of berths sold, with the ceiling set at 50%. For AC 2 tier and chair car, the maximum hike was 50% while for AC 3 tier it was 40%.

A senior railway official on condition of anonymity said, “The move will help to regain passengers that railways have been losing to airlines." On the question if the move is motivated by the upcoming state elections and 2019 general elections, he said, “There is no political motive behind it," adding that the minister publically has been supporting flexi fares as it has helped railways to earn revenue.

The railways also rationalised its freight rates to generate additional revenue. This will result in a 8.75% increase in freight rates for major commodities such as coal, iron and steel, iron ore, and raw materials for steel plants. Haulage charges of containers have been increased by 5% and freight rates of other small goods have been raised by 8.75%. The step will result in additional revenue generation of 3,344 crore for the railways.

The move on flexi-fares comes two months after the Comptroller and Auditor General in its report in the Parliament in August came down heavily on the railways. It said the scheme had led to a decrease in occupancy in all classes except sleeper class in Duronto trains. The occupancy increased only in a few premier trains. Even in AC 3 tier class, which was one of the most profitable classes, the occupancy dropped significantly after introduction of flexi fare and the vacant berths increased from 0.66% in the pre-flexi period to 4.46% in the post-flexi period.

Railways earned 552 crore from the premier trains post flexi-fare system during the period 9 September 2016-31 July 2017.

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