Very valid points, but the move is definitely in the right direction, and can be modified to improve the quality of service.
For starters, instead of allotting all the berths in one go at the time of chart preparation or allocating berths dynamically at the time of booking, they can be allotted in batches, each new batch being allocated berths and seats after a predetermined number of bookings are done. But care should be taken that the last batch of confirmed tickets is allotted well before the date of journey, so that passengers with confirmed tickets do not have to panic.
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more... With the right algorithms and back-end IT infrastructure, this can be enhanced by showing berth availability by coach no/berth type at the end of each phase of allocation. Also, This can provide scope for making Pooled Quota and Remote location quotas more transparent, and can be used to bunch together passengers with common source/destinations in a fixed set of coaches and re-purpose the same coaches for general passengers or wait-list clearance from subsequent locations.
But of course, care should be taken that passenger preferences are also respected and not completely ignored and as far as possible, it should be ensured that passengers get their preferred choice of berths on a first-come-first-serve basis.