The hike is in line with this year's budgetary announcement by then railways minister Pawan Kumar Bansal to levy a Fuel Adjustment Component (FAC) at a gap of every six months.
The increase in passenger fares will be effective in all classes of travel except for the suburban and ordinary second class.
For the period of February1 to July 31 this year, the public transporter incurred an additional burden of Rs. 12,000 crore on fuel costs. After today's hike, the Railways anticipate to mop up around Rs. 1150 crore - generating Rs. 400 crore from passenger fares and Rs. 750 crore from freight tariff.
In the six month period beginning February 1, price of high speed diesel purchased by the railways rose by 7.3%, while the Wholesale Price Index (WPI) of electricity rose from Rs. 126.7 per unit to Rs. 146.3 per unit - an increase of 15.4%.
An across the board increase of 1.7% in freight tariff has been announced. This comes on the heels of 15% levy imposed recently as "busy season charge" on the transport of all commodities from October 1.
Meanwhile, the Union cabinet has accepted the proposal of the Ministry of Railways for payment of Productivity Linked Bonus (PLB) equivalent to 78 days' wages for the financial year 2012-13 for all eligible non-gazetted Railway employees.
The financial implication of payment of 78 days' PLB to Railway employees has been estimated to be Rs. 1043.43 crore. About 12.37 lakh non-gazetted employees are likely to benefit.