Pricing in Indian Railways

Introduction
In economics, Monopoly (from the Latin word monopolium Greek dialect monos,
one + polein, to offer) is characterized as a tireless business sector circumstance
where there is one and only supplier of an item or administration. Monopolies are
described by an absence of monetary rivalry for the administration that they give and
an absence of suitable substitute products.
Monopoly should be recognized from monopsony, in which there is one and only
purchaser of the item or administration; it ought to additionally, entirely, be
recognized from the (comparable) sensation of a cartel. In a monopoly, a solitary firm
is the sole supplier of an item or administration; in a cartel a brought together
organization is situated up to somewhat arrange the activities of a few autonomous
suppliers (which is a type of oligopoly)

Essential Attributes of a Monopoly

Single Seller: A pure Monopoly model is an industry in which a solitary firm is the
sole
maker of a decent or the sole supplier of an administration. Barriers to entry
normally bring this on. Indian railway is the best example of pure monopoly as there
are no other competitors.
No Close Substitutes: The item or administration is novel in a ways, which go past
brand character, and can't be effectively supplanted (a monopoly on water from a
specific spring, sold under a particular brand name, is not a genuine syndication; nor
is Coca-Cola, despite the fact that it is separated from its rival in flavor).
Price Maker: In a pure monopoly a solitary firm controls the aggregate supply of the
entire business and has the capacity apply a noteworthy level of control over the cost,
by changing the amount supplied (an illustration of this would be the circumstance of
Viagra before contending medications developed). In subtotal restraining
infrastructures (for instance precious stones or petroleum at present) a solitary
association controls enough of the supply that regardless of the possibility that it
constrains the amount, or raises costs, alternate suppliers will be not able to
compensate for any shortfall and take noteworthy measures of piece of the overall
industry. On the similar lines, Indian railway is has full control over the price.
Blocked Entry: The reason an immaculate monopolist has no contenders is that sure
hindrances keep would-be contenders from entering the business sectors. Contingent
on the type of the imposing business model these boundaries can be monetary,
mechanical, lawful (e.g. copyrights, licenses), rough (contending organizations are
closed around power), or of some other kind of boundary that totally keeps different
firms from entering.

Price setting for unregulated monopolies

In Economics an organization is said to have Monopoly if it confronts a descending

inclining interest bend (see supply and interest). This is rather than a value taker that
confronts a flat request bend. A value taker can't pick the value that they offer at,
since in the event that they set it over the balance value, they will offer none, and on
the off chance that they set it beneath the harmony value, they will have an unending
number of purchasers (and be making less money than they could on the off chance
that they sold at the balance cost). Interestingly, a business with monopoly power can
pick the value they need to offer at. In the event that they set it higher, they offer less.
On the off chance that they set it lower, they offer more.
In most genuine markets with cases, falling interest connected with a cost increment
is because of losing clients to different merchants and incompletely to clients who are
no more eager or ready to purchase the item. In an unadulterated imposing business
model business, just the recent impact is grinding away, thus, especially for
unyielding products, for example, medicinal consideration, the drop in units sold as
costs rise may be a great deal less emotional than one may anticipate.
On the off chance that an imposing business model can just set one value it will set it
where peripheral expense (MC) squares with minor income (MR) as seen on the
outline on the privilege. This can be seen on a major supply and interest chart for
some feedback of syndication. This will be at the amount Qm; and at the value Pm.
This is over the cost of Pc and with a littler amount than the focused amount of Qc.
The hostile imposing business model increases is the shaded in region marked benefit
(take note of that this chart takes a gander at the situation where there is no altered
expense. On the off chance that there was a settled expense, the normal expense bend
ought to be utilized).
The length of the cost flexibility of interest (in total quality) for most clients is under
one, it is extremely favorable to build the value: the dealer gets more cash for less
products. With an increment of the value, the value flexibility has a tendency to rise,
and in the ideal said above it will be over one for most clients. A recipe gives the

connection between value, peripheral expense of generation and interest flexibility,

which boosts an imposing business model profit: a (known as Lerner file). The
monopolist's restraining infrastructure force is given by the vertical separation
between the point where the negligible expense bend (MC) meets with the peripheral
income curve (MR) and the interest curve. The more extended the vertical separation,
(the more inelastic the demand curve) the bigger the monopoly power ensuring larger
profit.
The economy all in all misses out when monopoly is utilized as a part of along these
lines, subsequent to the additional benefit earned by the firm will be littler than the
misfortune in buyer overflow. This distinction is known as a deadweight loss.

Introduction to Indian Railways

Indian Railways (IR) is the state-claimed railroad organization of India. Indian
Railways had, until as of late, an imposing business model on the nation's rail
transport. It is one of the biggest and busiest rail systems on the planet, transporting a
little more than six billion travelers and right around 750 million tons of cargo every
year. IR is the world's biggest business or utility head honcho, with more than 1.6
million representatives.
The railroads navigate through the length and width of the nation; the courses cover
an aggregate length of 63,940 km (39,230 miles). Starting 2005 IR claims an
aggregate of 216,717 wagons, 39,936 mentors and 7,339 trains and runs a sum of
14,244 trains day by day, including around 8,002 traveller trains.
Railroads were initially acquainted with India in 1853. By 1947, the year of India's
autonomy, there were forty-two rail frameworks. In 1951 the frameworks were
consolidated as one unit and turned into one of the biggest systems on the planet.
Indian Railways works both long separation and rural rail frameworks.

Background
The advancement of Indian Railway had its roots in the 1800s, when India was a
British province. The British East India Company and later, the British pioneer
governments were credited with beginning a railroad framework in India.
The British thought that it was hard to cross-incredible separations between better
places in India. They felt the need to associate those spots with trains to accelerate the
adventure and in addition to make it more agreeable than go by street in the immense
warmth. They likewise looked for a more proficient intends to exchange crude
materials like cotton and wheat from the hinterlands of the nation to the ports situated
in Bombay, Madras and Calcutta, from where they would be transported to plants in
England. Moreover, the mid-1800s were a time of insurrection and battle for Indian
Freedom.
The British pioneers needed to have the capacity to exchange officers rapidly to
places of turmoil. Railroads appeared to be the perfect answer for every one of these
issues.
Work started on the improvement of railroad frameworks in India in the mid 1850s.
At first, prepares were utilized to transport material between better places. The

principal business traveller train in India kept running in the middle of Bombay and
Thane (places in western India) on April 16, 1853.
The separation of 34 kilometers was secured in around 75 minutes. Indians were at
first uncertain of tolerating railroads as a method for travel, yet soon defeated that
apprehension and rail routes picked up notoriety. Before long, railroad lines started to
be laid in different parts of the nation, basically by private British organizations, and
the real locales in India were associated by rail. To advance the development of
railroad lines in India, the British Parliament presented the certification framework.
Under this framework, any organization that developed railroad lines in India was
given an assurance of a five percent return for each annum on the capital contributed.
The organization additionally had the privilege to haul out from the endeavor and get
pay from the administration whenever in the event that it was not fulfilled by the
profits. This helped quicken the improvement of railroads in the nation.
Various railroad organizations were joined somewhere around 1855 and 1870. A
large portion of them worked at a local level. By the start of the 1870s, the aggregate
track scope in India was 4000 miles. Notwithstanding business destinations, railroads
additionally started to assume a social part in India. At the point when there were
starvations in a few sections of the nation somewhere around 1870 and 1880,
railroads assumed an essential part in giving alleviation to the influenced territories.
Before the end of 1880, the aggregate track scope expanded to 9000 miles. In 1880,
the Darjeeling Steam Tramway began working (the name was changed to Darjeeling
Himalayan Railway in 1881). This railroad track was viewed as one of the best
designing accomplishments ever, crossing as it did, harsh and hazardous mountain
landscape at a lofty angle. In 1890, the British Government passed the Railways Act,
to administer the development and operation of railroads in India. By the start of the
twentieth century, there were about 25,000 miles of railroad track in the nation.

Railway zones

The Map of India above demonstrates the diverse railroad zones in India. The zones
are numbered in the map. The red dabs are the zonal home office. For regulatory
purposes, Indian Railways is partitioned into sixteen zones.
Given underneath is the table demonstrating these 16 zones at Konkan Railway*(KR)
is constituted as an independently joined railroad, with its central station at Belapur
CBD (Navi Mumbai). It goes under the control of the Railway Ministry and the
Railway Board.
The Calcutta Metro is claimed and worked by Indian Railways, yet is not a piece of
any of the zones. It is officially considered to have the status of a zonal railway
Sr. No. Name
1.
2.
3.
4.

Abbr.

NR
Northern Railway
North
Eastern
NER
Railway
Northeast
Frontier
NFR
Railway
ER
Eastern Railway

Delhi

Date
Established
April 14, 1952

Gorakhpur

1952

Maligaon(Guwahati)

1958

Kolkata

April, 1952

Kolkata

1955

Headquarters

7.

South
Eastern
SER
Railway
South
Central
SCR
Railway
SR
Southern Railway

8.

Central Railway

CR

Mumbai

9.

Western Railway

WR

Mumbai

5.
6.

10.
11.
12.
13.
14.
15.
16.
17.

South
Western
SWR
Railway
North
Western
NWR
Railway
West Central Railway WCR
North
Central
NCR
Railway
South East Central
SECR
Railway
East Coast Railway ECoR
East Central Railway ECR
Konkan Railway*
KR

Secunderabad
Chennai

October
2,
1966
April 14, 1951
November 5,
1951
November 5,
1951

Hubli

April 1, 2003

Jaipur

Oct 1, 2002

Jabalpur

April 1, 2003

Allahabad

April 1, 2003

Bilaspur, CG

April 1, 2003

Bhubaneswar
Hajipur
Navi Mumbai

April 1, 2003
Oct 1, 2002
Jan 26, 1998

Progress of Railways in Indian Economy

Railway Since its initiation, the Indian Railways has served to incorporate the divided
markets and in this manner has empowered the rise of a cutting edge market
economy. It joins mechanical generation and focuses with business sectors and with
wellsprings of crude materials and encourages modern advancement and connection
horticultural creation focuses with far off business sectors. It gives quick, solid and
financially savvy mass transportation to the vitality division, to move coal from the
coal fields to power plants and petroleum items from refineries to utilization focuses.
Given the scope and depth of this industry Indian Railways has turned into an image
of national mix and a key instrument for upgrading our guard readiness.
Cargo and traveler activity conveyed by the Indian Railways has recorded a
noteworthy development after Indias Independence. While the information records as
far as course kms, trains, traveler mentors and wagon limit have just multiplied amid
this period, the movement yield lists have expanded by six times. These
accomplishments were important because of particular inputs of reasonable
innovation, appropriation of imaginative operational procedures, staged lessening of
staff and working expenses and escalated checking of developments and upkeep
territories.

Major contributions of Indian Railways towards Indian economy

The contribution of IR in Gross Domestic Product (GDP) has been constant at
1% in fact it has gone down to 0.9% in 2012-13.The expenditure done as a
percentage of total transport expenditure has declined significantly. Indian
Railways in recent two decades has remained under invested even though the road
sector has seen a surge in funding. Railways Minister in his budget statement
announced that the railways could contribute upto two percent of GDP.
Being a labor-intensive industry, Indian railway has a huge workforce of over
13.6 lakhs employees. It is not just one of the largest employers in India but also
enjoys the same status in the world ranking.

Majority of IRs earnings comes from carrying bulk goods like iron ore, coal etc. The
revenue earned by Indian Railways for the year of 2014-15 is:
Other Sundary
Earnings Misc.
Other Coaching 3% Receipts
0%
3%

Revenue (2014-15)

Passenger
Traffic
28%
Goods Traffic
66%

The expenditure incurred by Indian Railways for the year 2014-15 is:
Dividend to
General
Exchequer
6%
Lease Charge
5%

Railways Fund
1%

Pension Fund
18%

Depreciation
4%

Expenditure (2014-15)
Staff & Wages
33%

Misc.
8%

Fuel (Diesel &

Electricity)
22%

Stores
3%

Railway Budget 2015-16

The last significant change in rail charges was done in 1999 and, in spite of the fact
that there have been expansions one of these was moved back. In the May of 2015
when Modi Government presented its first budget on the floor of the house, the past
UPA government conceded its arranged increments in rail charges, contending that it
was the right of the new government to settle on the matter and this years railway
budget put thrust on Indian Railways to become a prime mover of the economy.

The Union Minister Suresh Prabhus Rail budget majorly focused on expanding
Bhartiya Rails capacity substantially and modernizing infrastructure. It also put
thrust on how to increase daily passenger carrying capacity from 21million to 30
million, increase track length by 20%, from 1,14,000 km to 1,38,000 km, and grow
its annual freight carrying capacity from 1 billion to 1.5 billion tonnes.
One of the major goals for this years Railway budget is to make it financially selfsustainable and generate extensive surpluses from operations not just to benefit the
obligation expected to finance its capacity development but also to additionally
contribute on an on-set premise to supplant its depreciating resources.
Execution Plan
1) This years railway budget has emphasized on a medium term strategy. It shall
mark the start of a Five Year Action Plan to change the Railway sector in
India. The total proposed investment for 2015-19 is approximately Rs. 8.5
Lakh crores.
2) The plan also focuses on building partnerships with various important
stakeholders like State Governments, Public Sector Units, multilateral and
bilateral institutions and other Governments to get an approach on long term
funding and technology from overseas.
3) Indian Railways is envisioning a total investment of Rs. 8.5 Lakh crores in the
current Five Year Plan (FYP), which it would mobilize from different sources
multilateral banks, pension funds.
4) A major change that is proposed is Revamping of management practices. It is
targeting to speed up its decision making process, tighten responsibility and
ownership and improve management information system.
5) Giving more push to set new standards for Governance and Transparency, the
new team of railway ministry is walking on the path of Modi Government.

Indian Railway Passenger Carriers

The intricate and worlds largest railways system, i.e. The Indian Railways is a mix of
diversity and has various different carriers for all kinds of passengers serving to all
the stratas of Indian socio-economic population. Indian railway carriers can be
majorly sub-divided into four major groups, namely being:
Rajdhani / Shatabdi

Superfast Trains

Sleeper trains

Passenger Trains

Rajdhani / Shatabdi: The Shatabdi is among the quickest prepares in India and the
Indian Railways considers them as prestigious. The Shatabdi Express prepares keep
running over short to medium separations while the Rajdhani Express is a progression
of quick traveler train administration in India worked by Indian Railways uniting New
Delhi with other imperative destinations (generally capital urban areas of different

states). Both arrangements of trains have a greatest velocity of around 130 km/h (81
mph).
Superfast Trains: They make few stops, dissimilar to other Mail/Express prepares,
accomplishing to some degree shorter run times. Placing it in technical words, Trains
with a normal velocity, barring stops, equaling or surpassing 55 kilometers for each
hour (34 mph) (60 kilometers for each hour (37 mph) until the mid 1990s) on both
here and there excursions fall into the Superfast class and are numbered with a prefix
of 12 (beforehand 2). Counting stops (both income and planned specialized stops) the
normal speed regularly is underneath 55km/h.
Sleeper Train: These are somewhat the link between superfast trains and passenger
trains. They vary in speed and their mannerism of halts. Majority of them run
overnight and are generally for long distances. They may have fewer halts like a
superfast train or may with frequent stoppages.
Passenger Trains: These are slow trains making multiple stops and are convenient
for getting off at small towns and villages. These are economically priced for the
masses and also have two to three unreserved coaches.

Pricing In Indian Railways

As previously mentioned, the pricing for tickets in these trains although subsidized is
majorly dependent upon various factors such as:
Air Conditioning / Non Air Conditioning
Peak period / Lean period
Class of travel First Class, Second Class, Third class
No of Seats within a given coach 2 Tier, 3 Tier
Amount of Subsidy
Inflation
Cost of fuel / electricity
Supplementary charges on-top of the base fares
Reservation fees
Minimum distance for charge (base fare flooring)
Train route taken, i.e. in turn journey distance and travel time
The fare wearies from
Coach-to-Coach on the basis of the class, i.e., Tier 1, Tier 2, Tier 3 has
substantial difference pricing with three fold and two fold differences
respectively.
Train-to-Train, although marginally, ticket fares differ between Shatabdi and
Rajdhanis on the bases of other supplementary services offered for eg.
Railbandhu a monthly travel magazing is complementary given in all
Shatabdis and Continental cuisine is served in all Rajdhanis in Dinner on
request.

Train segment to train segment, i.e., the general pricing for a passenger train
differs from a superfast or top segment trains.

Pricing format from economic point of view

The fare pricing for trains is a sum total of monetary weights of the aforesaid factors
and then computed in total.
Although the top segment of Rajdhani and Shatabdi can be said to be duo-polistic and
with the dynamics of Nash equilibrium operating and both the trains enjoy their
respective share of the market segment with a cooperative understanding.
The pricing economics for superfast trains or sleeper trains can be said to be an
analogy of oligopoly economic market as in spite of the government subsidy, there
are various different trains operating even within the same segments.
There are small routes or less popular trains with poorer services as well as superior
superfast trains such as Duronto.
To understand the overall calculation behind the tariff fixation, pricing chart for one
of a superfast trains is given below as example.

Source : http://www.indianrailways.gov.in/railwayboard/uploads/directorate/coaching/pdf/Fares.pdf