Railway finances: Why small fare hikes won’t put Indian Railways on track to a brighter future

The recent decision of Indian Railways (IR) to raise fares on all classes of travel, other than suburban rail, season passes and short-distance second-class ordinary, reflects a dilemma that has long dogged IR and underpinned its fare decisions: Should IR be run as a commercial enterprise, albeit state-owned, or as a departmental undertaking with social objectives placed above profit?Historically, all governments, both before and after India’s 1991 embrace of market principles, have veered towards the latter view. Sadly, political calls have shaped almost everything about IR, including track expansion, stops along routes and, of course, train fares. Fare revisions have always had a populist angle.

They have mostly been confined to higher-priced classes, with suburban fares virtually untouched. The last time the latter were revised was in 2014, only to be partially rolled back in the face of protests. The latest revision, effective 26 December and the second in 2025-26, is no exception.

Not only are the hikes moderate, they are largely limited to dearer classes. Travel in AC coaches and non-AC coaches aboard mail and express trains is now costlier. But fares for suburban services and monthly season tickets, which cover the largest segment of passengers, remain the same.

Ordinary-class travel has also been spared—there is no hike in fares for up to 215km. Even where fares have been raised, the increase is nominal: just two paise per kilometre for higher classes in mail and express trains, and about one paise for ordinary-class travel beyond 215km. As estimated, IR will earn about ₹600 crore extra in 2025-26 from the revision.

The additional revenue is welcome. But it is too little to count for much. The Fifth Report of the