Railways hikes passenger fares for 2nd time in FY26; move may add ₹600 cr

'Modest' fare hike to have minimal impact on passengers while adding ₹600 crore to railway revenues, officials say, as costs rise and freight rates remain unchanged

For the second time in 2025-26, the Ministry of Railways has raised passenger fares, a move officials described as “modest” and calibrated to put minimal burden on travellers. 

The latest increase is expected to generate an additional ₹600 crore in revenue during the current financial year, the ministry said. At prevailing passenger volumes, the annualised revenue gain would have been close to ₹2,400 crore. 

Effective from December 26, fares for air-conditioned classes will increase by 2 paise per kilometre (km). Non-air-conditioned travel on mail and express trains will also cost 2 paise more per km.

 

Non-air-conditioned travel on ordinary trains will see a fare increase of 1 paisa per km for journeys exceeding 215 km, the Railways said. For a 500-km journey in non-AC coaches, passengers will pay ₹10 more. A Delhi–Mumbai journey in air-conditioned classes will now cost ₹30 extra.

 

“There is no increase in fares for suburban services and monthly season tickets, and no increase up to 215 km in ordinary class,” the national transporter said. Indian Railways last raised fares in July, a move expected to fetch around ₹1,500 crore in additional revenue.

 

The hike comes as the Railways grapples with rising wage and pension bill and unchanged freight rates since the past seven years. “The Railways has expanded its network and operations significantly over the past decade. To cater to a higher level of operations and to improve safety, it is increasing its manpower,” an official said. “Consequently, manpower cost has increased to ₹1.15 trillion, while pension cost has risen to ₹600 billion. Total cost of operations increased to ₹2.63 trillion in 2024-25.” 

To meet the higher manpower bill, the national transporter is focusing on boosting cargo loading and undertaking minor passenger fare rationalisation.

 

Experts said the latest fare hike is unlikely to significantly affect passengers, as rail travel remains more cost-effective than road transport and air travel in most cases. However, the approach requires streamlining, according to M Jamshed, former member (traffic) in the Railway Board.

 

“Passenger fare rationalisation, a misnomer for passenger fare hike, must be a well-planned exercise,” Jamshed said. “Sporadic hikes once or twice a year can neither address the Railways’ ever-growing passenger service losses, which are over ₹600 billion annually, nor help achieve ambitious budgetary targets such as ₹92,000 crore of passenger revenue for 2025-26.”

 

Railways should aim to achieve break-even in passenger services within five years, he said. Jamshed, now a distinguished fellow at Chintan Research Foundation, added that any lowering of passenger revenue targets at the revised estimates stage of the Union Budget would adversely impact the Railways’ operating ratio.

 

In the past, experts and parliamentary committees had called for alignment of fares with costs, particularly in air-conditioned classes. Last week, the Standing Committee on Railways also asked the ministry to examine annual reviews of freight rates, which have remained unchanged for seven years.

 

Indian Railways’ annual gross revenue exceeds ₹2.6–2.7 trillion, making the additional ₹600 crore about 0.2-0.25 per cent of total receipts.

 

The operating ratio for FY26 is estimated at 98.43 per cent. The operating ratio is a key indicator of financial health that reflects the expenditure incurred to earn every rupee of revenue.

 

In the context of Indian Railways’ overall finances, ₹600 crore is marginal in absolute terms but meaningful in signalling value, said Lalit Chandra Trivedi, former general manager of East Central Railway. “It would not materially alter the operating ratio or funding capacity for large capex projects, but it would help partially offset rising costs and support cash flows for passenger services, which are structurally under-recovered. The move also signals a shift from politically frozen fares to revenue-responsive pricing, which is fiscally healthy.”

 

Another former official, who requested anonymity, said the current approach is designed to minimise political fallout by introducing small but periodic increases.

 

Experts said the Railways should move towards a formula-based, transparent fare revision mechanism linked to inflation, energy costs and service quality improvements. Trivedi said the approach reduces fare shocks but cautioned that there are caveats.

 

“Frequent and unexplained increases without a published policy framework erode trust. Multiple modest hikes are in the right direction, but the Railways must institutionalise the process, not improvise it,” he said.

 

The Railways Ministry said ongoing improvements in passenger services have resulted in more efficient and safer operations. “India has become the second-largest cargo-carrying railway in the world,” it said. “The recent successful mobilisation of more than 12,000 trains during the festival season demonstrates improved operational efficiency. The Railways will continue to strive for greater efficiency while containing costs to meet its social goals.”