The formation of the Rail Tariff Authority (RTA), proposed in the Rail Budget 2012-13, has to be approved by the Cabinet.
The Prime Minister has sought to expedite the formation of the RTA and asked for a Cabinet note to be brought latest by January 15, 2013.
RTA is expected to look into the operational expenditure including the diesel and power cost for the train operation and suggest hike in the passenger fares to absorb the escalated cost.
Currently, the railways is facing a loss about Rs. 24,000 crore in passenger fare segment.
The cash-strapped railways is in the need of financial bailout as many of its ongoing projects are facing acute shortage of funds.
Railway minister Pawan Kumar Bansal, after taking over the ministry, had hinted at a possible fare hike in near future.
However, he has maintained that the fare will not be hiked for hike sake. "If fare will be increased then it will be for providing better services to passengers."