Railway minister Dinesh Trivedi after raising passenger fares for the first time in eight years, wants to link the fares to the cost of fuel -increasing or decreasing with changes in fuel rates.
Trivedi in the Rail Budget for 2012-13, which was presented in Parliament today, proposed to raise fares by as much as 30 paise per kilometere.
"I am contemplating a system of segregating fuel component in the cost associated with passenger services and call it FAC (fuel adjustment component)," he said in his Budget speech.
"The FAC will be dynamic in natural and will change in either direction with the change of fuel cost," he said. FAC may be something similar to the fuel surcharge levied by the airlines on air tickets. Fuel surcharge changes if there is a revision in rates of aviation turbine fuel (ATF) or jet fuel.
Trivedi also indicated further increase in fares if fuel, primarily electricity and diesel, costs rise further.
"I must also be forthright and take the House into confidence in mentioning that in the event of any further increase in input costs of Railways, it will not be possible for us to keep the passengers cushioned from the impact of such increases," he said.
Railways is looking at raising Rs 4,000 crore from passenger fare increase, as input costs have risen over the past decade because of higher fuel costs, wage increases and faster inflation.
"During this period, the cost of passenger transportation by road has increased manifold," said Trivedi. "Consequently, a large chunk of short distance traffic has got diverted from road to rail, creating additional pressure on rail infrastructure."