Pricing under Fire......

Indian Railways requires no background but yeah the pricing structure of the railways does. You can go through a post over here to understand their pricing structure thoroughly.
My argument centers on the online pricing policy adopted by the Indian Railways.

Let me start with an example –
For a ticket in an express train (A.P. Express) from Hyderabad to New Delhi, the charges I had to pay for an I-ticket are as following –
Base Fare – 1220
Reservation Charges – 25
Super fast Charges – 30
Internet Service Charges – 40
Courier Charges – 20
Transaction Charges (ICICI Bank Debit Card) – 11

Total = Rs. 1346

For rail reservation from the railway counters, the railways charge Reservation Charges for the infrastructure which the customer uses to get the tickets reserved like the manpower, stationary etc.

Introduction of online reservation introduced internet reservation charges levied on the consumer for using the online infrastructure of Indian railways. But now, the online customer pays for both online service charges in addition to the Reservation charges.

Why is the customer being billed for what he hasn’t utilized?

It seems like a way of discouraging the customers from using the online system while it should have been otherwise.

The cost structure of any service for the service provider will have a fixed and a variable component. Online services are cheaper because the service provider’s variable component goes down to almost negligible with just one time fixed cost.
This is what Banks have realized and are now encouraging their customers to go online by charging extra amount for providing a service from the bank counter to reduce the bank traffic and thus reduce the costs further.
Then why is the railways even after four years charging extra from the online customer?

Talking about figures, according to IAMAI (Internet and Mobile Association of India) Indian Railways recorded 2.5 million ticket sales through the Internet in the last financial year, a growth of 100 percent over 1.2 million sold in 2004-05.

Assuming each reservation from the Indian railway counter takes an average of 5 minutes (which I am sure majority will agree is negligible as compared to the actual), the number of man-days saved are 18116 which is working with 100% efficiency. Working with an extraordinary efficiency of 70% Indian Railways saved 25880 man-days in a year.

There are two ways of making profit - by reducing cost or by increasing prices. And over here Indian Railways is exhibiting the features of a poor service provider with lack of vision. Instead of sharing the savings with the customer, they are being charged extra for a cheaper service. It won't be too late before the customer's retaliate to this exploitation of monoply rule.

The X-Man
Manish Saini

Motiveless as usual.....

In India, we exclaim in surprise if our administration system becomes efficient. And this post is going to give you no reason for such a rare occasion.
The famous author and columnist Surjit S Bhalla, in a guest column for rediff argues against the illogical system of foreign portfolio investment where only institutions approved by SEBI can participate in the Indian Stock Market.

This policy commands that -
“These management fee-receiving institutions cannot be based in India because if they were, they would not be classified as an FII! Foreign-based individuals (Indian and foreign) are forbidden from investing in India.”

The X-factor around which Surjit argues is that while the Government is gaining nothing from this policy, it is loosing out on three important fronts – “large-scale employment in the financial sector, the development of India as a financial centre, and large-scale tax revenues (India lost close to Rs 10,000 crore (Rs 100 billion) in tax revenue last fiscal (2005-06).”

As per the policy –
“We require all foreign investors in the Indian stock market not to be based in India! Let me phrase it in a different, but equivalent, fashion. We state to the outside world that yes, India is generating wealth, yes, you can come and profit from it, but no, you cannot be based in India, or have India-based offices making the decisions. All the profits that you make are yours, and please pay the taxes on the fees that you generate to needy governments like the US and the UK.”

Through a crude analysis form the 2005-2006 FII profits, Surjit concludes that these institutions could yield a cool Rs 10,000 crore (Rs 100 billion) to the Indian treasury in the current financial year which is enough to finance the first year of the National Rural Employment Guarantee Scheme.

Now, the question which the government always leaves unanswered while devising these policies is ‘What is the motive for designing this policy?’

For drafting any policy an answer to this simple question would not only make the system more transparent rather would also facilitate a national debate which is a part and parcel of any “good Democracy”(sounds like an Oxymoron….right!!!)

The X-Man
Manish Saini