Indian Railways plans to do away with its flexi – fare scheme in about 40 trains. In the remaining trains where it was introduced, the scheme is to undergo modifications. Flexi – fare was introduced about two years ago to link ticket price on premium trains to market conditions. However, the scheme did not work out quite as planned because it is not easy for a state-owned bureaucracy to adapt overnight to a market-based model. Railways deserve credit for trying to innovate but it needs to be part of a larger change in organisational culture.
CAG carried out an extensive audit of the flexi fare – scheme, which brings out the incompatibility between a bureaucratic approach and market pricing. Flexi – fares were fixed in a mechanical way irrespective of demand and occupancy. Consequently, it actually lowered occupancy and often train fares were higher than air fares. Railways can no longer ignore competing modes of transport, including aviation, as all of them are capable of competing on price with premium trains. It is necessary for railways to benchmark its premium train fares to demand and occupancy but it cannot be done in a mechanical way. Markets are not static. There is a case for going back to the drawing board and coming up with a better scheme.
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