Railway minister Sadananda Gowda is expected to announce an increase in both passenger and freight rates in the Rail Budget 2014-15, slated to be presented in the second week of next month.
The NDA government will, most probably, utilise the leeway provided by the earlier UPA government that had left passenger fares unchanged in the interim railway budget in February, ahead of the general elections.
Presenting a vote-on-account, the UPA government decided to leave the difficult job of managing the Railways' weak finances to the next government.
"The hike in both passenger fare and freight rate is inevitable as the financial position of the railways is not so good. However, the quantum of hike is yet to be finalised," a senior railway ministry official said.
The railways had decided to increase both passenger fares and freight rates by 14.2 per cent and 6.5 per cent, respectively, effective 20 May. However, the decision also was put on hold leaving the decision to the next railway minister.
Railway officials, however, refused to confirm or deny the possibility of a rate hike in the next Rail Budget. "One cannot rule out its possibility. But at the same time it is not necessary to announce the hike in the budget only. It could happen before or after the budget also," they said.
Faced with a severe financial crunch, the railways was aiming to garner Rs8,000 crore by raising fares to partly offset a passenger subsidy outgo of nearly Rs26,000 crore.
Gowda himself, last week, said state-specific projects should be partly funded by state governments, since the railways does not have the necessary finances to undertake major expansion programmes.
Since Railway Budget has to focus on important issues such as safety, security and service, it is constrained to find financial resources for taking up growth plans, officials pointed out.
While the national transporter needs a huge investment to upgrade its signalling system and strengthening the track to prevent accidents, it doesn't have enough money to do that.
The Railways has targeted to improve its operating ratio (a measure of expenses as a percentage of revenue) from around 90.8 per cent in 2013-14. The previous Railway Budget had targeted operating ratio of 87.8 per cent against the actual operating ratio of 90.2 per cent in 2012-13.