Why rail fares may see a hike this Budget

Indian railways spends nearly Rs 77,000 crore on passenger operations while it receives only Rs 44,000 crore from passenger fares. It incurs a loss of Rs 33,000 crore annually.

Finance Minister Arun Jaitley recently said commuters must pay for the service they receive. The success of Railway Budget was measured by subsidising consumers and making populist announcements regarding trains, Jaitley added. Going by the FM's statement, possibilities are high that fares may be raised in this Budget.

Railways provides concession in rail fares to 53 categories. The account book of the rail ministry shows that the railways offers 43 per cent subsidy on a single train journey to its passengers. This means, if the railways spends Rs 100 on a train journey, it only charges Rs 57 from passengers and the remaining Rs 43 goes as subsidy.
 

The finance ministry is not keen on providing any financial assistance and instead wants the railways to bridge the gap through its internal resources. The Railways Ministry is considering generating money through commercial exploitation of its vacant land and station buildings, but that would require huge investment.