Rounding Off Charges: Competition Commission orders probe Against Railways and IRCTCÂ

Moneylife Digital Team 14 November 2018

Consumer Interest

The Competition Commission of India (CCI) has ordered a probe against Railways and Indian Railway Catering and Tourism Corp Ltd (IRCTC) for abusing their monopoly by charging higher than the actual base fare on the pretext of rounding off.

Meet Shah and Anand Ranpara, residents of Gujarat’s Ahmedabad and Rajkot, respectively, filed a case before the CCI alleging inappropriate practice of rounding off charges used by Railways and IRCTC while calculating fares. They said, actual base fares are rounded off to nearest higher multiple of five to arrive at the total base fare on the online portal of IRCTC. For instance, the total fare per passenger in the sleeper class of Ashram Express from Ahmedabad to Delhi is charged at Rs475, including taxes. In this case, the actual base fare could be anywhere between Rs421 to Rs424. However, the base fare for this journey is Rs425, after rounding off to the next multiple of five.

The informants also alleged that in case of bulk booking also the rounding off is used to charge more from passengers. For instance, if the actual base fare for a journey is Rs7 per passenger and four tickets are to be booked then the total base fare would be Rs28, which after rounding off should be Rs30. However, the railways round off actual base fare for each passenger separately. This results in each passenger paying Rs10 and the total face jumping to Rs40 instead of Rs30.

The CCI after finding prime facie evidence of norm violation as per section 4(2)(a)(i) of the Competition Act 2002, observed that, “At this juncture it appears that the Railways and IRCTC are rounding off the actual base fares for the online bookings without any plausible justification for the same.”

The Commission ordered its director general to conduct an investigation into the matter and submit his report within a period of 60 days from the receipt of the order.

The bench was also quoted saying, “If the DG comes across anti-competitive conduct of any other entity/person in addition to those mentioned in the information, the DG shall be at liberty to investigate the same. Also, the DG is directed to conduct a detailed investigation without restricting and confining to the duration mentioned in the information.”

In order to place emphasis on the fact that the Railways had indeed abused their monopoly, the Commission observed that they had earned Rs18 crore by rounding off actual fares at the cost of consumers. Since they are the only ones in the field, consumers have no option other than to accept this unfair pricing scheme, it added.

The railways, however in their defence argued that this kind of rounding off was done to ensure reduction in transaction time and that this policy is followed both online and at the counters. They also reiterated that, “in most of the classes, passenger fare is not charged as per the cost of running of services and is subsidised. It has been averred that there is a huge recurring loss in the passenger segment and the passenger fare has not increased substantially during the last fifteen years.”

The railways did accept that they do not maintain a separate account for such rounding off.

The Commission stated, “The Railways and IRCTC have not been able to convince the Commission as to why the policy of rounding off of actual base fares to the next higher multiple of Rs5 is applicable to the sale of online tickets, when it may be possible for them to transfer even one paisa electronically. Further, during the preliminary conference, they could not explain why rounding off is done separately for each passenger even when more than one tickets are booked through one account of the same time for a journey.”

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