RTPM-Session 11 & 12 Module D: Revenue Management Vankodoth Avinash | 19470

SYNOPSIS SHEET FOR MODULE D

Terminology:

 Total Operating Cost per trip = Running staff cost + Locomotive Fuel Cost + Linen Management Cost
+ Power Car Cost + Acquisition Cost + Catering Cost + Electrical Staff Cost + Cleaning Cost
 Revenue streams = Advertisement Revenue + Entertainment Revenue + Fare box revenue
 LCO (Life Cycle Cost) - All costs associated with the system or product development
 TCO (Total Cost of Ownership) - An insight into the total cost of acquisition and sustenance
discounted over asset life

Topic 1: Capacity Management for Long Distance Trains

 Underutilized capacity and inefficiencies in quota allocation are key limiting factors in passenger fare
box revenue in Indian Railways.
 Current IR system uses 1 or 2 leg split for seat booking & quota allocation which might be suboptimal
is there are multiple intermediate stations between Origin – Destination Pair. So, it becomes difficult
to achieve the twin objective of maximizing number of confirmed seats and increasing capacity
utilization.
 Possible solution discussed in the paper to address this issue is to have a dynamic leg split based on
the estimated demand for each of the station pairs (O-R; R-D; O-D where R is a set of remote
stations) and allocate quotas according to the demand.
 The demand can be estimated using booking data from PRS data warehouse; Passengers who have
traveled + wait-listed passengers who have not canceled their tickets within five days of their
departure date [Latent demand]
 Efficient seat allocation can increase both revenue of IR, passengers per train and customer
satisfaction with no increase in capacity.
 Using technology to find real time seat availability information can improve booking efficiency of IR.

Topic 2: Fare Box Revenue Management:

 Fare box revenue is the primary revenue source of IR but due to partial vacant seats/ empty seats/
inefficient seat allocation, the operating costs per trip is exceeding the operational revenue.
 Removing carriages if occupancy rate is below Break-even point should be considered to decrease
operational costs.
 Adding carriages if demand exceeds capacity to capture additional revenue should be considered to
maximize revenue per trip.
 Such adjustments in rake composition should be made to ensure that IR does not deny tickets to
those who needed and also does not operate with empty seats.
 Dynamic Pricing: Being a social welfare organization, IR is obligated to match the affordability cap of
common people and hence, dynamic pricing might not be a best solution to increase revenues.
Having a dual identity of having dynamic pricing only for luxury coaches also has an issue of people
switching to other modes.

Topic 3: Freight Revenue Management

 Lack of proper customer focus has costed freight revenue of IR and ~50% decline of national freight
share can be observed from 1950-1 to 2000-1.
 4P model for Freight is needed because IR primarily focuses on originating traffic and leaving
terminating traffic destination. 4P model considers both OD like in other transport businesses.
RTPM-Session 11 & 12 Module D: Revenue Management Vankodoth Avinash | 19470

4P model:

Product would include development and ownership of sidings, automation of

Pricing Strategies
Promotion
Place (logistics) attributes
loading/unloading, special purpose wagons, 24 hours loading/unloading,
engine on load etc.
for major bulk commodities and container traffic would be derived on the
basis of competitiveness with respect to other modes and market potential
would include freight schemes to improve the service attribute, and
information sharing (including through FOIS)
relate to inter-modal integration and warehousing

 Rail Traffic can be segmented into 4 segments namely Industry, Mines, Ports, Distribution Centres.
These 4Ps are segment specific and change according to the needs of customers, competition, end
to end connectivity, wagon needs, infrastructural needs etc.

Potential for improvement for IR:

Segment Potential for Improvement

Industry High capacity wagons
Special purpose wagons
Bigger train loads
Closed circuit rakes
24-hour operations
Mines Improving infrastructures at loading points (goods sheds, terminals, sidings,
automation)
Ports Increasing line capacity on rail route to hinterland
Appropriate customer-oriented systems based on supply chain requirements
Distribution Centres Target traffic moved from distribution centres to retail outlets to be the single
transporter for customers
Collaborating with other modes to provide multi-modal transport