Pricing Strategy of Indian Railways

g Strategy of Indian Railwa

PGPM 2014 – 16 Secton C Group  Adig 14P125 Dikshant 14P138 Nikhil14P152 Sakshi14P162 Sanchit14P164 Vikramaditya14P178

1

Abot !" #conomics o$ !" %ono&oly o$ !" Pric' Discrimination 

◦ P'ak (oad Pricing ) *+ , P'ak Pricing ◦ -irst D'gr'' Pric' Discrimination ◦ S'cond D'gr'' Pric' Discrimination ◦ .hird D'gr'' D'gr'' Pric' Discrimination Discrimination ◦ !nt'r , .'m&oral Pric' Discrimination Discri mination ◦ Dynamic Pricing

!"er"iew 2

!ndian "ail/ays is a stat' o/n'd 'nt'r&ris'0 /hich is o/n'd and o&'rat'd by *! *! throgh throgh th' %inistry o$ "a "ail/ays il/ays



!t is /orlds $orth larg'st rail n't/ork com&rising o$ 1150 km o$ track o'r a rot' o$ 650436 km and 70172 stations

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-irst introdc'd introdc'd to to !ndia in 1853 $rom 1853 $rom ombay to .han'

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Indian Railways 3

Si' o$ th' indstry

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.otal contribtion to th' 'conomysal's

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#m&loym'nt *&&ortniti's

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#cono$ics of Indian Railways 4

!ndian "ail/ays o&'rat's 70566 locomoti's0 50 coach 'hicl's and 2220147 $r'ight /agons



.h' !" r'gist'r'd a 159 gro/th in gross r''n' to "s 140485 cror's o'r th' last y'ar

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.h' rail/ays ha' o'r th' y'ars incr'as'd th' $r'ight r''n' by incr'asing its a:l' loading0 im&roing cstom'r and ado&ting an Si%e of s'ric's t&e Industry innoati' &ricing strat'gy 

5

!" is th' $orth larg'st rail n't/ork in th' /orld

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!t is s'cond larg'st in t'rms o$ th' $r'ight it carri's ;265 mn tonn's daily< nd'r a singl' manag'm'nt

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!t contribt's to th' d''lo&m'nt o$ !ndias indstrial and 'conomic landsca&' $or o'r 16 y'ars ) acconts $or arond 19 to th' DP



'otal contri(ution to #cono$y 6

Indian Railways – ) $onopoly

7

=a&ital !nt'nsi' V'ntr'

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#conomi's o$ Scal'

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o'rnm'nt "l's and "'glations

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Sources of Monopoly Power * its e+ects on Pricing Strategy 8

9

Pric' discrimination ':ists /h'n th' sal's o$ th' id'ntical goods or s'ric's ar' transact'd at di+'r'nt &ric's $rom th' sam' &roid'r



!ndian rail/ay 'n>oys som' &art o$ th' consm'r sr&ls by 'm&loying th' di+'r'nt m'thods o$ &ric' discrimination



10

-ollo/ing ar' th' $'/ $actors that 'nabl' !ndian rail/ays to 'ngag' in &ric' discrimination?

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!t 'm&loys mark't s'gm'ntation0 and achi''s this bas'd on arios $actors lik' ag'0 s':0 >ob ty&' 'tc  .h' &rodct and s'ric's o$ !" ar' not r'salabl' and h'nc' r'stricts its discont cstom'rs to b'com' r's'll'rs and b'n'@t $rom arbitrag'  !t has mono&oly and h'nc' is abl' to dictat' th' &ricing t'rms and conditions in s&it' o$ b'ing r'glat'd by *! 

11

!t is a $orm o$ &ric' t'chni' that is a&&li'd to &blic goods and is a &articlar cas' o$ (indahl 'ilibrim

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Di+'r'nt &ric's ar' charg'd $or th' sam' $acility /hich is s'd by th' consm'rs

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!ndian "ail/ays s's th' &ractic' o$ charging high'r &ric's dring &'ak &'riods /h'n th'r' ar' ca&acity constraints cas' marginal costs to b' high .his is call'd P'ak (oad Pricing

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Pea, -oad Pricing 12

13

!ndian "ail/ays 'm&loys this ty&' o$ discrimination by di+'r'ntial disconts in &'ak and o+B&'ak s'asons

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!" lanch'd C#m&ty -lo/ Dir'ction -r'ight Discont Sch'm'

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.his /as to 'nsr' b'tt'r tiliation o$ 'm&ty /agons in th' r'trn dir'ction0 "ail/ays introdc'd a $r'ight discont o$ 39 dring l'an s'ason and 29 dring &'ak s'ason on incr'm'ntal loading in th' 'm&ty o/ dir'ction

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!" also lanch'd C./o ('g -r'ight Discont Sch'm'

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.his is to 'nsr' that !$ trainload traEc is o+'r'd in co'r'd /agons $or both & and do/n dir'ctions0 th'n0 a discont o$ 29 in l'an s'ason and 159 in &'ak s'ason /old b' gi'n $or traEc in both dir'ctions

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.h'r' also ':ists an alt'rnati' to a &'ak load &ricing strat'gy is an o+B&'ak &ricing strat'gy /h'r'by disconts ar' o+'r'd to th' standard commt'r $ar' $or tra'l otsid' o$ d'signat'd &'ak &'riods




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Also kno/n as P'r$'ct Pric' Discrimination

.h' @rm shold b' a/ar' o$ ''ry consm'rs /illingn'ss to &ay and r'strict r'sal' o$ th' &rodct





Pric' ariations /ill b' bas'd on ◦ =stom'r Fillingn'ss to &ay ◦ Ability to &ay $or th' goods and s'ric's

.irst /egree Price /iscri$ination 16

-irms /ill charg' ''ry consm'r a di+'r'nt &ric'

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=om&l't' trans$'r o$ =onsm'r Sr&ls to Prodc'r

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Pro@ts incr'as' and 'conomic 'Eci'ncy is im&ro'd ;"'moal o$ DF(<

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Pr's'ntly0 !ndian "ail/ays do's not 'ngag' this bt &lans to do so in $tr' by haing onlin' action o$ $r'ight ca&acity



.irst /egree Price /iscri$ination 17

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Pric' ari's according to antity sold



A mono&olist s'ts th' block &ric's

Pric's ar' high'st antity boght



$or

@rst

block

o$

Pric's ar' r'dc'd $or 'ach scc'ssi' antity consm'd by th' sam' cstom'r



Second /egree Price /iscri$ination 18

G'aily 'm&loy'd by !ndian "ail/ays

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!ndian rail/ays charg' $or ''ry kilom't'r /hich is r'dc'd as on' tra'ls long'r .



Rad&anis I)C

Price Rs3

/istance ,$3

Price per ,$

angalor' to D'lhi

66H

2365

283

angalor' to 46 1282 358 -rom th' abo' ':am&l' it is 'ry cl'ar that th' Nag&r mor' yo consm'0 l'ss /ill b' th' &ric' &'r km




!" &roid's s&'cial &ass's call'd C!nd"ail $or $or'ign torists and N"!s




Variation in &ric' bas'd on location o$ &rchas' and cstom'r s'gm'nt S'gm'ntation bas'd on ag' 

◦ =hild ;5 , 12 yrs< , 59 discont ◦ =iti'ns ;12 , 6 yrs< , At &rchas' &ric' ◦ S'nior =iti'ns ;6 yrs $or %al' ) 58 yrs $or -'mal'<  

%al's , 49 discont ;=od' , S"=.IN< -'mal's , 59 discont ;=od' , S"=.NF<

'rain

C&ild   – 12 yrs3

Citi%en 12 – 60 yrs3

Senior Citi%en M5 .3

Sam&ark Jranti

26H

524

320 26H

"a>dhani

371

6675

430 371

Jarnataka #:&r'ss

276

538

32850 276

All discount codes applicable for 1ST AC from Bangalore to Delhi obtained from http://www.indianrail.gov.in

*

'&ird /egree Price /iscri$ination 21

S'gm'ntation /iscount Code Pass'ng'rs



bas'd

on

ty&'

o$

/escription

/iscount 

SP*".N

S&orts National (''l

59 ;1st =lass< 759 ;2nd and S(<

S.DN.

Std'nt =onc'ssion ;'n'ral<

59

.#A=G"

.'ach'r

259

.(S%!K

.halass'mia Pati'nt &ls on' 'scort

59 ;1A= ) 2A=< 759 ;3A=0 A= =hair 'tc<

J!DN#K

Jidn'y Pati'nt

59 ;1A= ) 2A=< 759 ;3A=0 A= =hair 'tc<

L.G2S"

Kn'm&loy'd yoth $or int'ri'/

19 ;2nd class< 59 ;S(<

*

All discount codes applicable obtained from http://www.indianrail.gov.in


S'gm'ntation &r&os'?



bas'd

on

tra'l

◦ .arg't cstom'rs int'nt $or sights''ing or &ilgrimag' tor ◦ Proid' inc'nti's $or "ond .ri&s ◦ !ss'd on all >orn'ys and all class's , starting nd .are 2 and 'nding onRoute sam' train )C3 N'/ D'lhi , Jan&r ='ntral , aya , Go/rah , Patna , Allahabad , Jan&r ='ntral , N'/ D'lhi 7112 ,$3

3214

Source: http://www.indianrail.gov.in/circular!ourne"#ares.html


Indi"idual -eg .are

'rain

.are 7rd )C3

N'/ D'lhi , Jan&r ='ntral

Sam&ark Jranti

735

Jan&r ='ntral , aya

Prshottam #:&r'ss

H

aya , Go/rah

Jolkata %ail

76

Go/rah , Patna

Akal .akht #:&r'ss

88

Patna , Allahabad

North #ast #:&r'ss

655

Allahabad , Jan&r ='ntral

%agadh #:&r'ss

535

Jan&r ='ntral , N'/ D'lhi

Prayag "a> #:&r'ss

735

Source: https://www.irctc.co.in

'otal .are

200


"ail/ays s'd s'gm'ntation bas'd on location by charging con'ni'nc' charg' ranging b't/''n !N" 1 , 2 $or thos' /ho books th' tick't onlin'



.his charg' commands &r'mim $rom cstom'rs /ho ar' /illing to &ay ':tra to aoid ''s

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"ail/ays also do's s'gm'ntation bas'd on d'stination?

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◦ 69 $r'ight =onc'ssion $or traEc book'd $rom oth'r stat's $or stations in North #ast


.his is th' &ractic' o$ s'&arating consm'rs /ith di+'r'nt d'mand $nctions into di+'r'nt gro&s by charging di+'r'nt &ric's at di+'r'nt &oints in tim'





!ndian rail/ay 'm&loys this ty&' o$ discrimination throgh th'ir .atkal S'a



!n .atkal th'y charg' high'r &ric's as tick't is book'd on' day b'$or' th' dat' o$ >orn'y

Inter 'e$poral Price /iscri$ination 26

•

.atkal =harg's ha' b''n @:'d as a &'rc'ntag' o$ $ar' at th' rat' o$ 19 o$ basic $ar' $or s'cond class and 39 o$ basic $ar' $or all oth'r class's sb>'ct to minimm and ma:imm as gi'n in Class of b'lo/ Min8 'at,al Ma:8 'at,al th' tabl' 'ra"el

C&arges in I9R3

C&arges in I9R3

S'cond ;Sitting<

1

15

Sl''&'r

H

175

A= =hair =ar

1

2

A= 3 .i'r

25

35

A= 2 .i'r

3

4

#:'cti'

3

4

Source: http://www.indianrail.gov.in/tat$alScheme.html


•

•

Additional .atkal charg's ar' l'i'd &ass'ng'rs $or booking on' day b'$or'

on

('t s tak' an ':am&l'?

Rad&anis III )C .are

9or$al Price

'at,al Price

%mbai to D'lhi

23

23H


=onsid'r th' rail/ay r's'ration syst'm



.h' train s'ats ar' a 'ry &'rishabl' commodity



A$t'r th' train mo's on $rom a &articlar station0 all th' nsold s'ats los' th'ir al' /hich can n''r b' r'co'r'd



At &r's'nt !ndian rail/ays mostly 'm&loys @:'d &ric's $or s'ats bas'd on arios d'gr''s o$ &ric' discrimination



/yna$ic Pricing 29

t in &ast th'y ha' tri'd dynamic &ricing on &r'mim trains only haing A=B!! and A=B!!! coach's

•

.h' dynamic $ar' &att'rn s'd by rail/ays is similar to th' on' s'd by airlin's /ith it going & /ith rising d'mand





#ncorag'd by th' o'r/h'lming r's&ons' to th' ':&'rim'nt o$ rnning &r'mim trains on dynamic $ar' &ricing0 rail/ays has d'cid'd to rn sch trains on 36 n'/ rot's in a bid to cat'r to th' rsh dring smm'rs and also to g'n'rat' ':tra r''n'

/yna$ic Pricing 30

/yna$ic Pricing 31



!n this Adanc' "'s'ration P'riod ;A"P< o$ th's' trains /ill b' a ma:imm o$ 15 days As th' >orn'y dat' com's clos'r and s'ats g't @ll'd th' &ric' incr'as's



as' &ric' o$ th' $ar's is incr'as'd and is at &ar /ith that o$ th' "a>dhani tatkal tick'ts t a high'r limit is @:'d



y dynamic &ricing !ndian rail/ays charging mor' to th' cstom'r /ho ar' /illing to &ay ':tra $or rg'nt tra'l



'cas' o$ this &rodc'r is abl' to acir' consm'r sr&ls as /'ll

/yna$ic Pricing 32

Pricing under railways without dynamic pricing

/yna$ic Pricing 33

Pricing under railways with dynamic pricing strategy

/yna$ic Pricing 34

Pricing Strategy of Indian Railways

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