Railways increase cancellation charges

Indian Railways have changed the rules for refund when reserved tickets are cancelled. The cancellation charges have been increased rather steeply and they now have to be cancelled much more in advance than earlier. Since the cancellation charges were enhanced not too long ago, this really came as a surprise.

It has been reported that this decision has been taken to discourage the touts from booking a large number of tickets. If the cancellation charges are small, then inability to sell those tickets in black market only results in small losses, but if the cancellation charges are large, then touts will be discouraged to book lots of tickets since the potential losses could be larger. And more genuine passengers will be able to get confirmed reservation.

It does not sound believable. What fraction of tickets are being bought by touts. Remember, the ticket has a name, gender and age, and each reserved passenger is expected to carry an identity card which should verify name, gender and age. Yes, TTEs are not very careful at times, and some can carry fake identity cards. The problem of touts today is different from what it used to be. Today, I can get a Tatkal ticket through a tout who has a setting with the reservation office so that my ticket will be booked before anyone else standing in the queue. With Advanced Reservation Period (ARP) of 120 days, touts do not block a whole lot of money 4 months in advance to do block booking in the hope that they will be able to sell all of those at a good profit closer to the travel date. I don't think increasing cancellation charges would have any impact on touts.

It seems to me that the real reason for this increase is to generate more revenue. Given that the Railway finances have been allowed to deteriorate for so many years, I am all for Railways trying to generate more revenue. My friends in Railways tell me that the expectation is that the new rules would add more than Rs. 1,000 crores to their revenue in a full financial year, certainly not a small change. However, they could have collected the same amount of additional revenue just by increasing the fare by 2-3 percent.

Of course, all transport providers charge those who do not travel to ensure that the cost of travel for those who do end up traveling is lower. And Railways should follow the industry practice. However, there are some problems with the specified rules.

The minimum cancellation charges are very steep. This causes some problems. One, what if I book a wait listed ticket, which does not get confirmed for several days. I decide to cancel it and go by alternate method (air, bus). I would expect that if the transport provider is unable to provide me a confirmed booking, it would charge me a bare minimum amount to cover its costs of booking and cancellation. Two, in some cases of short distance travel, the minimum cancellation charges are almost comparable with the total cost of the ticket. It means that there is absolutely no incentive for the passenger to cancel the ticket. Now, short distance bookings (~200 KM) are not the ones that touts go for, since the passengers invariably would prefer a bus instead of paying a significant premium to touts. From a revenue maximization goal, it would have been better for the Railways to get some cancellation charges and re-sell that seat to another passenger. So revenue goal is also not being satisfied by such high cancellation charges. The only one happy with such a system would be a corrupt TTE who can sell that seat to someone in the coach, which will only cause the Railways image to be tarnished.

The other serious concern that I have is on no refund rule on waitlisted tickets if they are not presented at least 30 minutes prior to scheduled departure of the train. Invariably, a wait-listed passenger will wait till the chart preparation time, which is roughly 4 hours prior to the scheduled departure of the train, and if the ticket is still wait-listed, it would first try to arrange for an alternate method of travel and not focus on ticket cancellation. Earlier, it was possible to cancel the ticket till several hours after the train has departed. Recently, it was brought down to 2 hours after the train has departed. Now, it is reduced further. This one really hurts. Railways should sympathize with their customers whom they have not been able to provide accommodation, and not use them to get maximum revenue out of them. (Of course, people like me who book tickets only online will get automatic cancellation of wait-listed tickets. It is only the PRS tickets that will have to be cancelled in that small time duration.)

In fact, even with confirmed tickets, the four hours prior to scheduled departure of train is an issue. Earlier, if the train was a couple of hours late, I could cancel the ticket and at least get 50 percent refund. Now, I can get (full) refund only if the train is 3 hours late, and that too if I cancel my ticket before the train departs.

Some increase in cancellation charges was due (despite an increase not too long ago), but playing with the time duration has brought in an element of inconvenience.

Of course, there is a huge positive news associated with all these changes in refund rules. Railways is promising to make all the cancelled seats available for current bookings (after clearing the waiting list, of course), and the current booking can also be done online. I think in most popular trains on most days, this will not be a big advantage, since waiting list is typically large, but this will be of help to people on many trains.

I think most of the problems that Railways face are due to the fact that passenger fares are subsidized even in AC classes. People are willing to pay a much higher fare and that gap is exploited in various ways. Railways keep coming up with some mechanism or the other to make the system more fair, and get them some extra revenue, but it does not work. I am told (and media has speculated about it too) that Railways is thinking of introducing dynamic fares (something that I have been advocating for years) in all trains in all classes. I strongly believe that having dynamic fares in all AC classes is an absolute must. Of course, the dynamic fare algorithm needs to be much more complex than the current algorithm used in Suvidha trains. One can not just change fares based on percentage of tickets sold, but it also has to consider the rate of selling those tickets, and how much time is left before the train departure date. Also, they may want to introduce several "classes" of tickets - refundable and non-refundable, cheap tickets which only give you middle berths, etc.

By the way, I am totally impressed with the news coming out of Rail Bhavan these days. Quietly, a revolution is taking place. I may disagree with the specifics of cancellation charges, but overall I am very excited about the changes that are taking place, and I will hopefully write another blog soon about them.