Railway stocks came under renewed buying interest during Monday’s trading session, December 22, with RailTel Corporation of India, Rail Vikas Nigam, Ircon International, IRFC and Indian Railway Catering & Tourism Corporation surging anywhere between 1% and 5%.
The rally followed the Indian Railways’ announcement of a rationalization of passenger fares on Sunday, with a revised fare structure set to take effect from December 26, aimed at balancing rising operational costs while minimizing the impact on passengers.
The revision, effective from Friday, will see fares beyond 215 kilometers in ordinary class increase by one paise per kilometer. In the Mail and Express non-AC categories, the fare hike has been fixed at 2 paise per kilometer, while AC classes will also see a uniform increase of 2 paise per kilometer.
The ministry clarified that the increase would have a limited financial impact on passengers. For instance, a 500-kilometer non-AC journey will cost only ₹10 extra under the revised structure. The rationalization is expected to generate an additional ₹600 crore in revenue during the remaining period of this fiscal year.
Railways last raised fares on 1 July 2025, increasing fares for ordinary second, sleeper (non-AC), and first-class travel by half a paise per km. That was the first hike since the Covid pandemic, when in January 2020, the transporter raised fares by two paise per km for non-AC and four paise per km for AC chair car and AC-3 tier categories.
According to the Ministry of Railways, the second fare rationalization this fiscal year would streamline tariff structures and enhance the financial sustainability of passenger services. Indian Railways makes losses on passenger transport across classes, with fares about 45% below cost. Freight charges cross-subsidize passenger fares.
Fare rationalization to boost Indian Railways’ operating efficiency
Ahead of the FY2027 Union Budget, the fare rationalization is expected to help the Railways improve its operating ratio, projected at 98.43% for the current fiscal year, Mint reported earlier.
The operating ratio represents the ratio of working expenses (such as fuel and salaries) to traffic earnings and is used to measure the operational efficiency of the transport utility.
After improving to 97.45% in 2020-21, Indian Railways’ operating ratio remained elevated at 107.39% in 2021-22, 98.14% in 2022-23, 98.43% in 2023-24, 98.32% (revised estimate) for 2024-25, and 98.43% (budget estimate) for 2025-26.
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