Mint Explainer | Why the Indian Railways increased passenger fares twice in FY26

The Indian Railways increased fares twice in this financial year—first in July and then in December, marking its most concerted effort in years to narrow losses from passenger services and ease the burden on freight users who have cross-subsidised passenger travel.While the hikes have triggered political criticism, the railways argues that the increases are modest, progressive and fiscally unavoidable, especially when passenger fares recover barely 55% of costs, implying a subsidy element of about 45%, as railway minister Ashwini Vaishnaw highlighted in the Lok Sabha during the recent winter session of Parliament.The twin fare revisions were part of a rationalization strategy aimed at improving the financial sustainability of passenger services without imposing a sudden shock on travellers.The railways has been absorbing the rising costs of employees, pensions, safety investments and network expansion even as passenger fares remained structurally underpriced.

Losses from passenger operations are increasingly difficult to offset, especially with freight growth moderating and further freight tariff hikes ruled out.The July and December hikes together reflect a calibrated approach—small increases spread over time, rather than one steep hike.The latest fare increase in December is only the fourth under the BJP government in the past 11 years and was preceded by increases in July 2025, January 2020 and June 2014.The fare rationalization, effective 1 July, focused on marginal per-km increases:• Ordinary second class (non-AC): +0.5 paisa per km• Sleeper class: +0.5 paisa per km• Ordinary first class: +0.5 paisa per km• Mail/Express non-AC: +1 paisa per km• AC classes: +2 paise per kmCrucially, no increase was imposed on