The two consecutive passenger fare hikes by the railways in 2025 will unlikely reduce the subsidy burden on the national transporter that it provides on the passenger services, railways minister Ashwini Vaishnaw told Parliament. The minister said that railways provide around 45% concessions on the passenger rail fares, and the revisions are not significant to cover the subsidy burden.
“The fare revision is likely to have insignificant impact on the total amount of subsidy because this revision ranges from half paisa to 2 paisa only per kilometer of travel. It is estimated that less than half of the trips will have a marginal increase in fare. The increase in fares on both the occasions was low and have been undertaken to balance passenger affordability while maintaining operational sustainability,” the minister said.
Affordability Paradox
In FY26, the railways rationalised passenger fares twice – after a gap of 5 years. These revisions were applicable on various major train services such as Vande Bharat, Rajdhani, Shatabdi, Duronto, Amrit Bharat, Tejas, Jan Shatabdi, Namo Bharat Rapid Rail, and others. The minister said that the fares for suburban services and season tickets, including both suburban and non-suburban routes, were not hiked to maintain affordability for lower and middle-income families. Also, reservation charges, superfast surcharge and other ancillary charges were not increased.
As per the Budget 2026-27 estimates, the railways is expecting 9.1% jump in passenger fares in FY27 over the previous year. The revenue increase is likely to be higher than the overall passenger traffic which is expected to grow at 4.4% to 7.7 billion in FY27.
Structural Reforms
The railways has historically been offsetting the losses on the passenger side with profits on the freight segment. The latest Economic Survey has suggested certain reforms like reducing cross-subsidisation of passenger segment, and rationalisation of freight rates. “High freight rates, due to cross-subsidisation, distort competition with roads, inflating commodity and consumer prices, as well as logistics costs. Rationalising freight rates could improve revenue buoyancy, incentivise a modal shift of freight from roads to rail, and increase market share,” the survey said.