The recent hike in the railway ticket cancellation charges has been disturbing and ironic (most of the charges have been doubled). The objective of such doubling the cancellation fees is that the railway board wants to “discourage” touts/agents on black marketing of tickets and to plug the scope of misuse. Apparently, the objectives are impeccable. What is wrong is the method. Notice the word “discourage” carefully. It wants to discourage agents, not punish. Why does not the board directly identify the touts and punish them? Why does not the Indian railways take direct steps to curb such activities?
Let us say for one second, that the board cannot take such direct steps either due to political compulsions or technical reasons. This is why the ministry/board is taking indirect systems to discipline the touts and help genuine passengers. Even if the ticket cancellation charge is hiked, who will ultimately pay the fine? Passengers, right? The passengers who are unaware of such complex cancellation/refund rules will still go to the travel agent. Since, it is not a penalty on such middlemen, those agents will hardly stop booking bulk tickets online. One of the stated objectives is to stop “black marketing”. How do they do black marketing? Is it that the agents buy bulk tickets online and then sell it on black market or they buy over the counter (in the railway stations in connivance with the railway countermen) and sell it later? If it is done online, then how the agents are able to issue bulk tickets? If it is done over the counter, then why are they allowed to have so many tickets?
What I am worried for is that the passengers may not be aware of such complex cancellation systems (see the chart below which is taken from here. The ordinary passenger who books tickets online and wishes to cancel due to genuine reasons will suffer and pay higher fees; whereas the agent will pay nothing. Even if they are aware of such refund/cancellation rules, if they have to cancel ticket for genuine reasons, the passenger will bear the fee. How is the new refund rule discouraging agent?
Will such “indirect” punishment help curb the rail ticket mafia? One is seriously skeptical. What if it doesn’t succeed in its objectives? What is the next solution? Raise cancellation charges again? How long will the railway board go on to hike? In its attempt to punish the touts, the railway board is, sadly, punishing all genuine passengers whom it pretends to protect.
Further, policy decision is more regressive and passenger-unfriendly. When all reserved-seats are already sold, the policy decision of not refunding money to a confirmed-ticket holder if s/he wishes to cancel for some reason is difficult to understand. Given that lot of passengers travel in with waiting tickets, what is the loss to the rail board? There is no efficiency loss. The rail ministry does not lose money. The agent or bookies do not suffer any financial loss. Only the customer suffers.
What percentage of the confirmed tickets is cancelled every day? My guess is 20 to 25 per cent. If this is so, then I suspect there is a hidden agenda behind this cancellation price hike. Perhaps, it is the easiest way to raise funds for the cash-strapped rail board. If this is so, then it is nothing less than a crime. Why cannot the ministry raise the passenger fare? Political reasons? Why should 20 to 25% of the passengers who cancel their train tickets bear the burden of raising funds when all other passengers travel? This is a glaring example of a highly regressive taxation. Is it not better to reduce the charge and raise the rail fare?
Further, it is a (in fact, bad) reform by stealth! Notice, no political party opposed to it. More importantly, there is no public protest. It also points out to an important fact: Public as such don’t have problem with rail price hike unless encouraged by the political parties.
Suggestions are in order. The cancellation charges will be dynamic and should be linked with the number of vacant seats. Further, simplify the cancellation charges. One-time fee before the train starts. And once after the train starts. Lastly, irrespective of the passenger applying for refund, the railways must refund the net of the cancellation charges to the passenger’s account. The IRCTC must have a list of passengers who did not travel. The reason is very simple: since a lot of wait-listed passengers are travelling, the IRCTC is not losing anything.
Let us say for one second, that the board cannot take such direct steps either due to political compulsions or technical reasons. This is why the ministry/board is taking indirect systems to discipline the touts and help genuine passengers. Even if the ticket cancellation charge is hiked, who will ultimately pay the fine? Passengers, right? The passengers who are unaware of such complex cancellation/refund rules will still go to the travel agent. Since, it is not a penalty on such middlemen, those agents will hardly stop booking bulk tickets online. One of the stated objectives is to stop “black marketing”. How do they do black marketing? Is it that the agents buy bulk tickets online and then sell it on black market or they buy over the counter (in the railway stations in connivance with the railway countermen) and sell it later? If it is done online, then how the agents are able to issue bulk tickets? If it is done over the counter, then why are they allowed to have so many tickets?
What I am worried for is that the passengers may not be aware of such complex cancellation systems (see the chart below which is taken from here. The ordinary passenger who books tickets online and wishes to cancel due to genuine reasons will suffer and pay higher fees; whereas the agent will pay nothing. Even if they are aware of such refund/cancellation rules, if they have to cancel ticket for genuine reasons, the passenger will bear the fee. How is the new refund rule discouraging agent?
Will such “indirect” punishment help curb the rail ticket mafia? One is seriously skeptical. What if it doesn’t succeed in its objectives? What is the next solution? Raise cancellation charges again? How long will the railway board go on to hike? In its attempt to punish the touts, the railway board is, sadly, punishing all genuine passengers whom it pretends to protect.
Further, policy decision is more regressive and passenger-unfriendly. When all reserved-seats are already sold, the policy decision of not refunding money to a confirmed-ticket holder if s/he wishes to cancel for some reason is difficult to understand. Given that lot of passengers travel in with waiting tickets, what is the loss to the rail board? There is no efficiency loss. The rail ministry does not lose money. The agent or bookies do not suffer any financial loss. Only the customer suffers.
What percentage of the confirmed tickets is cancelled every day? My guess is 20 to 25 per cent. If this is so, then I suspect there is a hidden agenda behind this cancellation price hike. Perhaps, it is the easiest way to raise funds for the cash-strapped rail board. If this is so, then it is nothing less than a crime. Why cannot the ministry raise the passenger fare? Political reasons? Why should 20 to 25% of the passengers who cancel their train tickets bear the burden of raising funds when all other passengers travel? This is a glaring example of a highly regressive taxation. Is it not better to reduce the charge and raise the rail fare?
Further, it is a (in fact, bad) reform by stealth! Notice, no political party opposed to it. More importantly, there is no public protest. It also points out to an important fact: Public as such don’t have problem with rail price hike unless encouraged by the political parties.
Suggestions are in order. The cancellation charges will be dynamic and should be linked with the number of vacant seats. Further, simplify the cancellation charges. One-time fee before the train starts. And once after the train starts. Lastly, irrespective of the passenger applying for refund, the railways must refund the net of the cancellation charges to the passenger’s account. The IRCTC must have a list of passengers who did not travel. The reason is very simple: since a lot of wait-listed passengers are travelling, the IRCTC is not losing anything.
Prof. T N Srinivasan's comments (He mailed it to me):
ReplyDeleteDear Santosh:
I read your blog. It seems to discuss too many seemingly interconnected objectives of travelers, travel agents and government with a scheme for cancellation penalties without any clearly specified objectives. Why don't you set up a simple formal model with a train with a given number of seats for each day in the future. Assume constant social cost of running the train is independent of the number of seats and whether the are occupied or not. Assume it to be zero for simplicity. The government wants to offer the seat insurance scheme under which all tickets have to be purchased in advance, purchase assures a seat at a price, but not using it on the date involves a penalty and not proving an assured seat is required the government to compensate the traveler. Each of the same number who travel each day as the number of seats available maximizes his/her expected utility from having an assured seat at the cost of penalty if he/she has to cancel. Assume the daily distribution of cancellations is iid. Try to derive the steady state of the model where the distribution of seats purchased is stationary with the government maximizing its expected revenue from ticket sales and penalties. I am not sure whether this model has a solution!
tn
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ReplyDeletethanks for sharing its very usefull thanks again
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