Railway board chairman Vinay Mittal has written to railway minister Dinesh Trivedi, seeking a fare hike.
According to Mittal, the fare hike is required to match the recent increase in the fuel bill, including diesel and electricity cost, which is around 18-20% of its annual expenditure.
The planned railway expenditure for 2011-12 comes to Rs 73,000 crore, which could go up to Rs 78,000 crore by the end of this financial year if fares wouldn't be raised as fuel prices are already inflated, he mentioned.
There could be a significant drop in 'investible surplus' of Rs 13,000 crore to Rs 4,000 crore after the government revised its economic growth target from 8% to 7.5%, which could affect railways' development plans further.
The railways lose Rs 20,000 crore in the passenger fare segment on a yearly basis.
The last passenger fare hike was effected under railway minister Nitish Kumar in 2002.
Once railway minister Dinesh Trivedi clears the proposal, it would go to the cabinet for approval. They need parliamentary approval for the Budget but not for fare rationalisation, as the board has been in existence since prior to independence.
The parliamentary railway convention committee and the planning commission, also in the favour of raising passenger fares to cope up with the fall in earnings.
Besides the fare hike, the railways could also pass on the burden of service tax to the commuters which is 10%.
The railways run 10,500 trains and ferry nearly 22 million passengers every day. During Lalu Prasad Yadav's days, passenger fares were marginally reduced for three consecutive years.