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The impact of the new railway catering policy on consumer consumption in the mumbai railway food catering system in maharashtra Iidia?

Table of content

Introduction

The Indian railways provide service to 22 million1 passengers daily, with more than, 76,608 passenger coaches under its control2 . Most of these passengers traverse arduous journeys through the terrains of the country to reach destinations, raising the need for effective catering services that can supply passengers with fresh meals.

 

In 1955, the Indian Railways implemented departmental catering on a 'No Profit, No Loss' basis at a few key stations and train services to model the quality and service3 The catering policy in its earlier revisions of 2005 and 2015 looked at the distribution of duties between government-owned organizations and private licenses, to ensure the service of quality meals and implementation of cost-cutting measures, which included handing over recurring-loss units to contractors and running departmental units on a nominal profit of three to four per cent, which would be used for improving services.3

 

The new catering policy of 2017 (Appendix 1) addresses the shortcomings of its earlier revisions and involves a clear mandate to maintain a sanitary supply of food aboard trains, a separation between food preparation and food distribution, as well as changes to running kitchen equipment.3 It also contradicts the 2010 catering policy and instructs the transfer of the operation of base kitchens (class B and over), static and mobile units, from under the control of the zonal railways to the control of public service undertaking, the Indian Railway Catering and Tourism Corporation (IRCTC), due to repeated complaints of low quality of food services.3 The policy also includes the enhancements of new initiatives like e-catering, which allows food to be delivered to travelling passengers from various restaurants' chains, and allows the IRCTC to manipulate the price of the catered meals in the Indian railway caterings system. Through the policy, the IRCTC controls the number of functioning catering units.

 

The 2017 policy makes IRCTC the sole entity responsible for catering services in the Indian railways. It aims to increase the demand for meals from consumers, hence, an important aspect of the efficiency of the policy relies on its effect on consumption.

 

This research aims to answer the question, “How does the New Railway Catering policy of 2017 impact consumer consumption in the Mumbai Railway Catering system in Maharashtra, India?” The research is related to the economic theory of the firm, theories of demand and supply, elasticities, tradeoffs and, allocative efficiency. The research will follow an analysis of consumer response to the changes brought forward by the policy which were mainly a price change, quality measures and several catering units in Mumbai to determine whether the policy was successful in ensuring an increase in consumer consumption by instilling positive consumer attitudes towards quality and hygiene.

 

To ensure the research question remains in the essay's scope, this research will focus on Mumbai’s central railway system and not its suburban railway system. There are t types of catering services available, the in-pantry meals, static station units and e-catering services, and this essay will focus on consumption trends of the three.

 

Why did you choose this topic?

 

This research is important considering the Indian railways operates with extensive subsidies covering the cost of supplying the railway service to India’s massive population.5 Policies meant to increase consumption ultimately affect the railways’ ability to function efficiently at sustainable profit levels. Hence, analyzing the efficiency of the new catering policy 2017 will also ultimately allow us to examine its effect on government expenditure, and analyze the efficiency of the IRCTC as a firm.

Hypothesis

A brief overview of related materials leads to the alternative hypothesis that - the collations of data sources should demonstrate the new catering policy of 2017 has led to an increase in consumption. Mumbai railway catering system. Whereas the null hypothesis remains, the new catering policy has no impact on consumption in the Mumbai rail food system.

Methodology

The extent of the impact of the New catering policy 2017 is investigated by examining a combination of primary research and secondary sources to understand the impact of the new catering policy of 2017 on consumption, in Mumbai’s railway catering system. These are explained in detail below.

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  • A. Primary research

    Primary research carried out in the form of a survey involved questions regarding consumer trends towards catering services, to assign numerical values that represent consumer consumption. The target population for the research remains the citizens of Mumbai - part of the population subset that uses the train service. Lockdown restrictions resulted in the survey being carried out online, which subsequently makes the target population being focussed on Mumbai train users with access to the internet and English language skills, from this target population sample size of 96 participants was acquired. The list of questions asks consumers preferences and habits in the years 2013 to 2020, this range of years was chosen to explain the changes in consumption caused by the policy by examining consumer perception before application.

     

    The survey was made using the google forms software and circulated with the use of WhatsApp groups' messages, tweets, Facebook posts and Reddit community posts (Appendix 1). Personal data from all survey participants were not stored and kept anonymous. Data obtained from the survey are included through Appendices 2 to 8

    Figure 1 - Table On Survey Questionnaire.

    B. Secondary Research

    Firstly to determine the validity and reliability of data obtained from the survey, its results were collated with academic journal articles that explore investigations regarding consumer perception of Indian railway catering services. These were the Passenger Satisfaction on Catering Services of Indian Railway Catering and Tourism Corporation Ltd, Study (2018) 6 and the Hospitality & Public Health, Case Study of Indian Railway Catering of 2016. 7 Both of which provided a similar distribution of data.

     

    To understand the trends of shifting demand and supply of catering services, the price changes of pantry catering services in the year 2013 8 and 2019 9 and for the Rajdhani/Shatabdi/Dulonto trains was also researched (Appendix 9). The price change and menu change for the catering services on station-specific static and mobile units, in the years 201310 and 201911 , was also researched (Appendix 10). Lastly, for analysis regarding the efficiency of policy, the f financial data regarding expenditure, operating revenue, production assets via IRCTC Corporate Portal Annual 12 reports were utilized.

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  • YEAR
    Quantity Demanded
    Price of Lunch
    2013
    59
    125
    2015
    60
    125
    2017
    66
    125
    2019
    71
    185
    2020
    21
    185
    Figure 2 - Table On Demand Schedule For Catering Services.
    Figure 3 - The Demand For Catering Services In Mumbai From 2013 to 2020.

    In Diagram 1, there is an outward shift of Demand - an increase in demand from the year 2013 to 2019, for lunch at a price that has increased from R.s 125 to R.s 185. The quantity demanded increases from 59 (2013) to 62 (2015), to 66 (2017) at price R.s 125, then increases to 71 (2019) and then falls to 21 (2019) at price R.s 185. We see how a price increase has allowed the Mumbai catering system to increase the supply of products, as per the law of supply. This is because the firm uses the extra income from increased prices to expand its production. The costs of production must be covered by total output which is why the Mumbai catering system increases the price to be able to better support consumer consumption. However, the shift in supply is mainly attributed to the mandate of increasing access to meals and therefore driven strongly by non-price/revenue factors.

     

     

    Graph 1 shows the number of participants that indicated ‘Excellent’ and ‘Good’ for their perception of Mumbai catering services in terms of Health and quality, the data used for this was obtained via the primary research(Appendix 6).

    Figure 4 - Trends Of Consumer Perception Of Catering Services, In Terms Of Health And Quality
    Figure 5 - IRCTC Catering Revenue.

    This Data was collected via the IRCTC corporate portal reports and represents an increase in revenue in the catering sector of the Indian railway in 2017 to R.s 1044 cr. in 2019 to finally falling to its lowest in 2020 to R.s 227.08. The data from before 2017 is not relevant to analysis as the IRCTC was not responsible for catering in the Mumbai catering system before that.Following the explanation of the Mumbai catering Industry as a monopoly, a diagram can be drawn in the form of a monopoly graph that represents the outcomes on price and output following the monopolization of the Mumbai catering services.

    Figure 6 - The Market Structure Of The Mumbai Catering Services.

    Prior to the introduction of the monopoly in 2013, we see at a price of R.s 125, 59 units of goods were produced, where Average cost = Marginal cost = Price, following the assumption of a perfect competition model where different licenses competed for market share. Through the introduction of the monopoly in 2017, there is an increase in price to R.s 185 following the assumption of profit maximization the output should fall to Q’m where Marginal cost = Marginal revenue. However, that is not the case, through the survey 2019’s output is placed at 71 (Appendix 3)

     

    The catering system is a government-owned monopoly, and hence it does not function with the purpose of profit maximization. The increased prices are not used to fuel profit but to rather increase the efficiency of production. The IRCTC unique position in the market and its government ownership results in the usual assumption of the monopoly of price increasing and output decreasing do not hold true, as there is a subsequent increase in total output as the price of a good increase. The increased prices are given back to the consumers in the form of external benefits such as quality meals, more accessibility etc.

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  • Figure 7 - Table On We Can See The Increase In Production Assets Of The IRCTC.

    This data taken from the IRCTC corporate annual reports represents constant effort to increase output. Since the IRCTC is the sole producer, it does enjoy abnormal profits, but due to its government management, these abnormal profits are given back to the people in the form of social benefits. This social benefit is explicitly analyzed in the opening of new Jan haars all over India, “The Jan Aahar scheme was launched by the Government under which poor and low-income group people will be offered nutritious and delicious meal twice a day at a low price of Rs 15/-” 17

     

    In combination with increasing production and persistent increase in demand for catering services, the IRCTC has been able to successfully expand without imposing on the social benefit by not enforcing steep prices. This is achieved by functioning at economies of scale that reduce the average cost per meal, therefore allowing IRCTC to be able to increase revenues.

     

    Subsequently, monopolization increases social allocative efficiency as it ensures there is no underconsumption of railway meals due to its unavailability or due to competing wants of a commercialized firm.

     

    “Merit goods are goods that carry strong positive externalities, which are benefits enjoyed by a third party by consumption of a good.” 17 The Mumbai catering system monopoly functions to maximize social benefit. Therefore the consumption of a chosen Lunch meal in the 2/3AC category functions as a positive externality of consumption, as it allows for nutritious meals to be provided to people at low prices to be people who otherwise may not be able to afford them. This is seen as an external social benefit as access to healthy meals, in the long run, is economically beneficial. This can be visualized in Diagram 4, where the Lunch meal prices and their subsequent demand and supply have been taken for the years 2013 and 2019.

    Figure 8 - Social Benefits In The Mumbai Catering System.

    In the diagram we see how through the efforts of the 2017 catering policy the demand for catering services increases from D1=MPB (Marginal Private Benefit) in the year 2013 to slowly D2=MSB (Marginal Social Benefit), meaning now there is the creation of external benefit that can be used by the IRCTC to make meals more accessible for the poor. Hence, R.s 185, is the socially optimal price that allows the Mumbai catering sector to operate to production and socially optimal output level. Subsequently, monopolization increases social allocative efficiency as it ensures there is no underconsumption of railway meals due to its unavailability or due to competing wants of a commercialized firm.

     

    The Mumbai catering service system, therefore, utilizes its abnormal profits to maintain the Economic well-being of society by ensuring accessibility of nutritious food across lower-income groups. Therefore the Mumbai catering through the 2017 policy underwent monopolization, ultimately resulting in a net positive social benefit gain for consumers, in terms of quality meals that are widely accessible.

    C. The Case of 2020

    The data collected through the primary and secondary research presented a clear downward trend of demand revenue in the 2020 system, the data for 2020 was not used to make economic assumptions for demand behaviour and the effects of monopolization. The Covid-19 pandemic provided unprecedented situations which resulted in the creation of unique consumption trends, which while providing an intricate understanding of the complexity and interdependence of various tourism and hospitality industries, makes analysis too broad for the scope of this essay.

     

    However, economic it is important to the fall in demand for catering services in Mumbai and fall in revenue of the IRCTC catering segment all over India in 2020 provides further context to the effects of present real-world situations and non-price factors on consumer consumption.

    Evaluation

    One of the weaknesses of the essay remains the absence of publicly available empirical evidence regarding consumer behaviour in the Mumbai catering system, which was overcome by surveying with a sample that hoped to replicate its target population.

     

    However as mentioned earlier the survey suffered from a major flaw, the inaccessibility of perspective on consumer trends among the lower economically backward population subsets of Mumbai, which mostly reside in slum-like communities; due to ongoing challenges of the Covid-19 pandemic. The target population thus is not representative of all of Mumbai, but the population with access to a mobile device and the internet, that is those with an upper standard for quality of life. It can be anticipated the results of Demand and price sensitivity analysis would have been more severe if the survey accessed 100 per cent of the consumer population within the Mumbai catering service.

     

    Diagrams 1 and 3, do not also account for potential surplus or wastage of product, due to the unavailability of anticipated supply statistics. There have been several efforts over the years by the Indian railways to reduce the quantity of food waste, yet because of the absence of its Data, the effect of possible surplus cannot be seen on the social benefit expedited by the IRCTC.

     

    However, the research does utilize a range of sources to ensure its credibility and achieve efficient triangulation. It provides exact answers to the questions at hand, by differing to different aspects of consumer consumption. It looks at a range of questions initially and narrows down to comprehensible arguments.

     

    Lastly, the finding of this essay may prove to be redundant in a post-covid-19 economy and varied consumer behaviour. Considering these critical points, its important to understand the real-world implications of the essay are still limited. In future extensions, detailed analyses could be conducted regarding the implications of the covid-19 pandemic, on tourism and hospitality sectors like the catering system. Surveys could be conducted with higher and varied samples and should there be the availability of detailed analysis of data regarding Indian railway catering segment focussed balance sheets.

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  • Conclusion

    The research attempts to triangulate data, to be able to answer the research question “How does the New Catering policy of 2017, impact the Mumbai catering system, in Maharashtra India” by the use of a survey and secondary data regarding the price of catered meals and assets of the IRCTC. The analysis of consumer trends from the survey and their collation with secondary sources allows the formation of a considered response to the hypothesis of the essay. To reinstate, the alternative hypothesis was - the collations and processing of primary and secondary data sources should demonstrate the new catering policy of 2017 has a positive impact on consumer consumption in the Mumbai railway catering system i.e. leads to an increase in consumption. Whereas the null hypothesis remains, the new catering policy has no impact on consumption in the Mumbai rail food system.

     

    The research carried out has shown that there has been a significant increase in the demand for catering services in Mumbai, positive consumer perception and an increase in qualitative and quantitative consumer social benefit, as seen by the efforts of the monopolizing the Mumbai catering services, and hence the alternate hypothesis is accepted. Therefore to conclude, the 2017 catering policy positively impacts consumer consumption in the Mumbai catering system.

    Bibliography

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    Bharat Sarkar Government Of India Rail Mantralaya Ministry Of Railways. “Bharat Sarkar Government Of India Rail Mantralaya Ministry Of Railways (Railway Board),” N.D. Https://Indianrailways.Gov.In/Railwayboard/Uploads/Directorate/Stat_econ/Annual-Reports-2019 -2020/Year-Book-2019-20-English_final_web.Pdf. Page 10

     

    “Standing Committee On Railways (2017-18) (Sixteenth Lok Sabha) Ministry Of Railways (Railway Board) Twenty First Report New Railway Catering Policy 2017 Lok Sabha Secretariat New Delhi,” 2018. Https://Eparlib.Nic.In/Bitstream/123456789/763828/1/16_railways_21.Pdf. Pages 12, 10, 9

     

    “Irctc | Ibef.” Ibef.Org, 2020. Https://Www.Ibef.Org/Industry/Indian-Railways/Showcase/Irctc.

     

    Today, India. “Siddharatha Tiwari.” India Today, June 23, 2016. Https://Www.Indiatoday.In/India/Delhi/Story/How-Much-Did-Govt-Pay-For-Your-Train-Ride-See-I nfo-Printed-On-Your-Tickets-15717-2016-06-22.

     

    Rao, U. “Passenger Satisfaction On Catering Services Of Indian Railway Catering And Tourism Corporation Ltd. (Irctc): A Study.” International Journal Of Latest Technology In Engineering Vii (2018). Https://Www.Ijltemas.In/Digitallibrary/Vol.7issue6/01-08.Pdf. Pages 3 -7

     

    Kumar, Dr. D. Antony Ashok. “Hospitality & Public Health - A Case Study Of Indian Railway Catering And Tourism Corporation (Irctc).” International Journal Of Social Science And Economics Invention 2, No. 10 (October 25, 2016). Https://Doi.Org/10.23958/Ijssei/Vol02-I10/02. Page 4

     

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    All Indian Railways., The General Manager. “Government Of India Ministry Of Railways Railway Board, Cc_60_2019,” November 12, 2019. Page 1 Https://Indianrailways.Gov.In/Railwayboard/Uploads/Directorate/Traffic_comm/Cc-2019/Cc_60%2 0of%202019.Pdf.

     

    All Indian Railways., The General Manager. “Government Of India Ministry Of Railways Railway Board, Cc_78_2012,” October 21, 2012. Page 1 Https://Indianrailways.Gov.In/Railwayboard/Uploads/Directorate/Traffic_comm/Comm-Cir2k12/Cc -78.Pdf.

     

    All Indian Railways., “Government Of India Ministry Of Railways Railway Board, Cc_64_2019,” December 12, 2019. Page 1 Https://Indianrailways.Gov.In/Railwayboard/Uploads/Directorate/Traffic_comm/Cc-2019/Cc_64_20 19.Pdf.

     

    1.Irctc.Com. (2020). || Irctc Corporate Portal ||. [Online] Available At: Https://Www.Irctc.Com/Annual-Report.Html [Accessed 12 Dec. 2021].

     

    Blink, Jocelyn, And Ian Dorton. Oxford Ib Diploma Programme Economics Course Book. S.L.: Oxford Univ Press, Page 43, 2020.

     

    Blink, Jocelyn, And Ian Dorton. Oxford Ib Diploma Programme Economics Course Book. S.L.: Oxford Univ Press, Page 49, 2020.

     

    Dorton, Ian, And Jocelyn Blink. Ib Economics Includes Instant Access. Page 168 Oxford Univ Pr, 2015.

     

    St. “Watch | Mumbai Idli Vendor ‘uses’ Toilet Water To Prepare Food; Fda Orders Probe.” The Statesman. The Statesman, June 2019. Https://Www.Thestatesman.Com/India/Mumbai-Idli-Vendor-Uses-Toilet-Water-Prepare-Food-Fda- Orders-Probe-1502761098.Html.

     

    “Welcome To Indcaretrust.Org.” Indcaretrust.Org, 2019. Http://Www.Indcaretrust.Org/Modules/Cms/Jan_ahar_yojana.Php.

     

    Market. “Ib Economics: Unit 2.8(2): Market Failure - Merit Goods And Demerit Goods.” Subscription Websites For Ib Teachers & Their Classes. , 2022. Https://Www.Thinkib.Net/Economics/Page/33808/Unit-282-Market-Failure-Merit-Goods-And-Dem erit-Goods-.

     

    .

    Appendices

    Appendix 1 - Copy of survey invitation message.

     

    Hello!, As a part of the International Baccalaureate Diploma course, Extended Essay, I am required to write an independent research paper. The paper investigates the impact of the new catering policy 2017, on the Mumbai railway catering system, and to do so it analyzes consumer trends over the years in regards to the catering system.

     

    If you’re an inhabitant of Mumbai and have travelled utilizing its western and central railway system please fill out the survey link attached, as the earliest.

     

    Privacy - Your data will be stored anonymously and deleted post the completion of the paper. If you wish for your data to be withdrawn, from the research, please reach out via the contact mentioned.

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  • Figure 9 - Table On Survey Data Q1, Participant Age Distribution.
    Figure 10 -
    Please indicate your use of catering services (pantry meals, station canteens) throughout the years
    Very Likely
    Likely
    Not Likely
    Not at all
    The year 2013
    11
    48
    28
    9
    year 2015
    11
    51
    27
    8
    year 2017
    13
    53
    24
    6
    year 2019
    15
    56
    21
    4
    year 2020
    2
    19
    51
    4
    Figure 11 - Table On Survey Data Q2, Participant Demand Trends Over The Years.
    Figure 12 -
    Please indicate your reason for avoiding railway catering services.
    Number
    Percentage
    Health and Hygiene concerns
    41
    42.70%
    Quality of food provided
    26
    27.10%
    too expensive
    6
    6.30%
    Prefer carrying self packed food 15 15.60% Other:
    15
    15.60%
    Other:
    8
    8.30%
    Figure 13 - Table On Survey Data Q3, Reasons For Substitution Of Railway Catering Service
    Figure 14 -
    Please indicate your perception of railway catering services (pantry meals, station canteens) concerning quality and hygiene through the years
    Excellent
    Good
    Average
    Poor
    year 2013
    9
    44
    35
    8
    year 2015
    7
    40
    38
    12
    year 2017
    10
    44
    33
    9
    year 2019
    13
    46
    30
    7
    year 2020
    0
    24
    57
    15
    Figure 15 - Table On Survey Data Q4, Participant Perception Of Railway Catering Services In Terms Of Health And Quality Margins.
    Figure 16 -
    Please indicate your preference of the type of catering service
    Number
    Percentage
    E-catering
    8
    8.30%
    Pantry meals
    70
    72.90%
    None
    18
    18.80%
    Figure 17 - Table On Survey Data Q5, Participant Distribution Between Pantry Meals And E-Catering Endeavour.
    Figure 18 -
    Please indicate if applicable the reason for preference of pantry catered railway meals over e-catering service?
    Percentage
    ease of booking pantry meals
    60.40%
    e catering technology insufficiently effective
    3.10%
    The concern of the quality of e-catered meals
    8.30%
    Low confidence inNon-vegetarianeconomicNon-vegetarian the e-catering delivery system
    26%
    other
    2.08%
    Figure 19 - Table On Survey Data Q6, Reasons For Preference Of Pantry Meals Over E-Catering Services.
    Figure 20 -
    Please indicate the train travel class you usually travel by?
    Percentage
    1AC
    22%
    2AC/3AC
    73%
    Sleeper
    5%
    Figure 21 - Table On Survey Data Q7, Train Class Distribution.
    Figure 22 -
    Figure 23 - Table On Prices Of Meals In Pantry Car Vehicles, Over The Years.
    Figure 24 - Prices Of Meals In Static And Mobile Station Carts, Over The Years.
    YEAR
    Calculated Revenue of catering sector in crore rupees
    No of trains with IRCTC Catering service
    No of food Plaza's
    No of Cell Kitchens/base kitchens
    No of Jan ahaars
    2020
    227.08
    550
    287
    10
    56
    2019
    1044.21
    417
    293
    16
    56
    2017
    464.82
    323
    254
    12
    53
    2015
    346.38
    65
    198
    4
    13
    2013
    315.15
    37
    157
    4
    14
    Figure 25 - IRCTC Financial D
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