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Dynamic pricing is so destructive!

So Delhi Chief Minister Arvind Kejriwal had to pounce upon the cab operators Ola and Uber through drastic action over their dynamic pricing. In this, the cab aggregators charged hefty rates in times of peak demand especially during the odd-even number rule.

While I am all for modest pricing of consumer services, I am struck by the partiality. This practice has been rampant with airlines over the last couple of years with exorbitant pricing of tickets in times of demand and festivals. The difference between the low and high fares had, at times, been as high as 15 times.

Such practice has also been extended to the Indian Railways under Suresh Prabhu. For decades, successive railway ministers had not dared raise passenger fares. Prabhu followed this practice through his last two budgets. But, he quietly introduced very high pricing to exploit demand; like his charging special fares for special trains introduced to clear huge traffic. With the concept of dynamic pricing coming into play, the fares are not fixed and keep increasing based on the demand and berth vacancy. For instance, a ticket on a Suvidha train from Chennai to Madurai costs more than Rs 1000 while it is only a little more than Rs 300 on a superfast express train. One also notices the train fare for a second AC exceeding by a mile the air fare!

There is a similar hike in tatkal fares, reservation and cancellation charges. In a sector where demand for a reserved berth/seat far in excess of capacity, such arbitrary pricing impacts severely the hapless traveller.

Dynamic pricing is related to demand and supply. The government should confine its role to fixing ceiling rates and focus on improving public transport.

 

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