On any given day, nearly four in ten tickets on the Indian Railways (IR) network are on a waitlist. And almost every sixth passenger who purchases a train ticket does not actually make the journey due to such a waitlist.
It is no secret that IR’s vast network is stretched, with more demand than actual seats available. The problem is exacerbated on certain routes, where demand could almost be double the available seats.
In this context, it is worth analysing which of the routes to be operated by private players have the maximum demand and could therefore see maximum bidder interest.
In its most ambitious project ever, Indian Railways has put up 109 train routes for private operation, and plans to award a 35-year concession to the selected bidders by next year.
As part of this project, the routes to be offered to private players have been divided into 12 clusters: Bengaluru, Chandigarh, Chennai, Delhi (two clusters), Howrah, Jaipur, Mumbai (two clusters), Patna, Prayagraj and Secunderabad.
According to a study conducted jointly by state-owned rail engineering consultancy RITES and consulting firm Deloitte Touche Tohamatsu, most of the routes identified for private operators have “sizeable” traffic, including intermediate stations and cities on the route.
And since the concessionaires would have full flexibility in defining what services they offer and what they can charge, they should be able to manage demand.
Routes with the strongest demand
An analysis by train ticket discovery and booking platform Confirmtkt reveals that among the 109 routes up for bidding, the Coimbatore-Chennai route has the highest demand. The next four routes with strongest demand (in descending order) are New Delhi-Patna, Chennai-Madurai, Mumbai-Surat and Patna-New Delhi.
Routes such as Amritsar-Faizabad, Chandigarh-Nagpur, Faizabad-Amritsar, Guwahati-Darbhanga and Karimganj-Agartala had the lowest demand among all the routes up for bidding, according to Confirmtkt.
Kotha Dinesh Kumar, Co-Founder and CEO of Confirmtkt, told Moneycontrol that routes where the number of waitlisted passengers is the highest should see the most attractive bids since there is latent demand. “Even if trains on high-demand routes run at 50-60 percent occupancy, AC First and AC Second class can break even fast as long as fares have a 20-30 percent premium over current IR fares,” he said.
According to the RITES-Deloitte assessment of traffic patterns, there were nearly 45,000 waitlisted passengers on the Coimbatore-Chennai route last year, even when IR carried more than 35 lakh passengers on confirmed tickets between the two cities. Of the total number of waitlisted passengers, nearly 6,400 had booked an AC class ticket and this could be perhaps the single biggest factor in the route coming in at the top of the demand pecking order.
Premium fares for premium services
The private train operators are expected to offer premium services, with state-of-the-art coaches, WiFi etc. They are also expected to charge a premium over regular IR fares. The understanding is that current AC class passengers of IR would comprise the bulk of the traffic for private players, since these passengers are expected to be able to afford a premium on fares for better service. So, not just the total number of waitlisted passengers on a route, the proportion of those who booked an AC class ticket may also determine the attractiveness of a route for a private player.
On the Chennai-Coimbatore reverse journey, the number of waitlisted passengers was even higher, at nearly 50,000, and those waitlisted for the AC class were nearly 6,800. The RITES-Deloitte study found that the Amritsar-Faizabad route had total waitlisted passengers at a little less than 28,000 last year but for the AC class, this number was just 656.
Ajay Shukla, former Member, Traffic, Railway Board, pointed out that among the routes where private operators would be able to charge a premium on fares, those with the highest percentage of waitlisted tickets may witness brisk bidding. But, he said, general affordability would also be a factor.
“Most IR routes are saturated traffic-wise and there is heavy demand on almost all sections. But a large number of sections are price-sensitive, too. Bihar to Delhi and Bihar to Mumbai sections witness heavy traffic but are also very price sensitive. The Punjab region (Chandigarh-Delhi and Chandigarh-Amritsar) can accommodate higher fares. Small sections of the public that travel between Delhi-Kolkata, Delhi-Mumbai and Delhi-Bangalore can also afford to pay a premium on fares,” said Shukla.
Fares will need a balancing act
As of now, many of the passengers who book AC first class tickets but are put on a waitlist opt to fly to their destination instead. This is most often the case when the route is a short one, usually less than a 12-hour journey. To be able to wean away passengers willing to fly, the private operators will have to maintain a fine balance between airfares and those charged for AC first and second-class travel, especially for shorter routes.
According to the draft concession agreement for private train operations, the selected operators can fix fares without any regulation but have to pay pre-determined charges to use the rail tracks, other infrastructure and some manpower from the IR.The bidders are also expected to share a fixed percentage of gross revenue with Indian Railways and the bidder offering the maximum revenue share in each cluster will win the auction. In this scenario, one would expect fares to be steep so that the operator can extract maximum revenue, but that may not be the case. Most sector experts have said that fares could be at most 25-30 percent higher for dense routes.