Some years back the Indian Railways introduced a Tatkal scheme, whereby passengers faced with an urgency and a willingness to pay, were given the option of purchasing their tickets just before the journey at a higher cost. This scheme became instant hit and was soon adopted by a number of other utilities. Today civic utilities like water, sewerage, and electricity connections are given on priority to those in immediate need of the service, for a premium. This premium reflects the additional cost incurred in delivering the service faster than the normal route.
The Tatkal scheme takes into account the varying needs and wants of customers for access to a particular service, and consequent differential willingness to pay of customers. The economic cost of the expedited service delivery is captured in the premiums demanded for its delivery.
Apart from its economic dimension, the Tatkal scheme also checks corruption and makes the process of service delivery more transparent. It is commonplace for corrupt officials to take bribes and expedite service delivery. The presence of citizens willing to pay the extra amount to access the service out-of-turn, only compounds the corruption problem. The Tatkal scheme, by legitimizing that additional payment, institutionalizes the informal arrangement.
The argument that this discriminates against the poor and those who cannot afford to access this service is fallacious. The Government has the obligation to deliver public services within a reasonable period of time. This arrangement has been institutionalized for the delivery of every service, by means of the Citizen Charter. Any service delivery which is out of turn and quicker than this schedule is obviously a privilege, and should rightly command a premium.
Following the Tatkal scheme, there are similar service delivery arrangements for a number of civic services in the Vijayawada Municipal Corporation (VMC). There is a well established Citizen Charter that governs the schedule for delivery of civic services in the normal course. Ever since the Citizen Charter was introduced, there have been numerous complaints that the counter staff and other VMC officials, accept bribe to expedite delivery of services. Citizens who want access to a particular service quicker and willing to pay a higher price for the service, offer this additional amount as bribe. In fact such an arrangement suits the rent-seeking officials perfectly, in so far as it gives them enough freedom to selectively deliver services. It also encourages them to expect similar rent payments from even those citizens who are not faced with the urgency and therefore unwilling to pay the premium.
Recently, a new expedited service delivery scheme has been started in the VMC for Birth and Death Registration, Building permissions, Property Tax assessment for new buildings, Mutations or title transfers, and water and UGD connections. The Corporation charges a small amount as premium for expedited delivery of these services. The huge response to this scheme only re-affirms the huge demand for expedited delivery of such services, which was hitherto being serviced by rent payments. It is also a reflection of the massive corruption that was latent in the system.
Similar price discrimination, which captures the differential willingness to pay of customers, can be adopted in many sectors of public service delivery. I am sure the day is not far off when price discrimination is adopted to sell railway tickets like that already in place for selling flight tickets. This becomes relatively easier with the provision of ticket sales through the Internet. The French state owned SNCF Railways is already issuing railway tickets by way of differential pricing.
The Tatkal scheme and its variants are a Pareto efficient arrangement and make certain categories of people happier or better off, without making anybody worse off. (In any case, the Citizen Charter schedule will be adhered to) It is also an economically efficient solution in so far as it generates additional revenue at no extra cost and also eliminates the distortions in the incentive structure that encouraged rent-seeking behaviour.
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