Railway passenger fares in all AC classes and first class may rise by 3.6 per cent from July 1 as there are little indications that the Finance Ministry would extend service tax exemption to Railways beyond this month.
Sources in the Ministry conceded that the fare hike looks imminent as the Railways could ill-afford to absorb the additional burden of Rs 5,500 to Rs 6,000 crore given its financial condition.
The sources said the Railway Minister, Mr Mukul Roy, had written a letter to the Finance Minister, Mr Pranab Mukherjee, last week requesting exemption for Railways from paying service tax, but the request has gone unheeded so far.