As pressure is mounting on it from various quarters including the Finance Ministry and the Planning Commission to raise fares untouched for last eight years, the Railway Board is understood to be preparing a blue print for a possible fare hike.

The hike could be anywhere between 10 and 12 per cent or Rs 35 for every 500 km, highly placed Railway sources said.

With little assistance coming from Finance Ministry and the overall failures on its part to generate internal revenue, Railways have no options but to rationalise fares, they said.

Railway Minister Dinesh Trivedi had earlier this month hinted about a possible hike in fares as "there was a case to do so as input cost had risen over the years".

The fare hike could also be linked to fuel prices to offset that additional pressure, sources revealed.

The passenger fare segment is subsidised to the tune of Rs 16,000 crore.

While a fare hike may not be adequate to cover its rising expenses, the national transporter could also explore other avenues which could be in the form of levying surcharges or cess for infrastructure creation in the Rail Budget proposal, they said.

Reports of two high-level committees on safety and modernisation which are likely to be presented shortly, is expected to put additional pressure on railways to find funds for its modernisation plan.

In such an event railways could also seek annual financial assistance which would be over and above the budgetary support, the sources said.

Railways could seek not less than Rs 40,000 crore as budgetary support in the coming budget, up from Rs 20,000 crore which it had got in 2011-12.

A substantial hike in budgetary support is essential for completion of the existing 149 rail projects and meeting its safety upgrading and modernisation goals. As it is, railways could fall short of its freight target of 993 million tons for the current financial year.

The Railways carried 704.81 million tons of freight traffic till last December.

During the recently concluded general manager conferences, railway top brass is understood to have made it clear that curtailing expenditure should be one of the top priorities of each zone so as to improve its operating ratio, which at present is hovering between 95 and 98 per cent.