New Delhi, Jan. 9: The Indian Railways' perilous finances left it with little option but to raise passenger fares and tap the market for loans.

The biggest employer in the country is likely to suffer a loss of Rs 25,000 crore this fiscal in the passenger segment alone, against Rs 20,000 crore a year ago.

"The fare hike is expected to generate over Rs 6,600 crore revenues a year, of which Rs 1,000 crore will come from the hike in AC fares alone," said railway minister Pawan Kumar Bansal.

He added that the hike would rake in an additional Rs 1,200 crore between January 21 and March 31 this year.

Indian Railways will also borrow Rs 15,000 crore from the market through its dedicated financing arm Indian Railway Finance Corporation (IRFC) in 2012-13, which was proposed in the 2012 budget.

The IRFC, a government agency which lends to railway projects, will on January 21 start selling tax-free bonds to the public to raise Rs 8,900 crore as part of its borrowing programme.

The IRFC has already raised Rs 1,018.60 crore through the private placements of bonds.

"Losses in passenger segment, which were Rs 6,159 crore in 2004-05, had risen to Rs 19,964 crore in 2010-11 (18 per cent per annum) and is expected to increase to Rs 25,000 crore in 2012-13," said Bansal.

The minister was, however, non-committal on a hike in freight rates, which are used to cross-subsidise passenger fares. Railway officials said cross-subsidisation had become unviable, and the railways could persist with it only at the cost of pricing itself out of the goods transportation business.

Indian Railways earned Rs 67,879.95 crore till the end of October 2012 against the target of Rs 70,147.74 crore, which is 3.23 per cent less than the budgeted provision. In the passenger segment, the railways earned Rs 17,691.43 crore against the target of Rs 18,196.46 crore, a gap of Rs 505.03 crore.

Revenues from goods also witnessed a decline, with the national transporter earning Rs 46,805.48 crore against the target of Rs 48,580.09 crore till October.

Bansal said, "The freight traffic target could also not be met with the load showing a shortfall of 13 million tonnes till December end."

The Indian Railways was expected to handle a total traffic of 1,025 million tonnes in 2012-13.

The railways today also cut its spending plan for the current fiscal to Rs 51,000 crore from Rs 60,100 crore.

Former railway minister Dinesh Trivedi had hiked fares in the budget of March 2012 to mop up an additional Rs 4,000 crore, but his party Trinamul Congress had reversed the increase.

Officials said the railways needed funds to do even the elementary things ' upgrading signalling system, facilitating the running of trains through fog, installing anti-collision devices and introducing bio toilets.

At present, the railways have 347 ongoing projects for new lines, gauge conversion and doubling of tracks. But funds crunch has led to the curtailment of allocations in a majority of them.

"Just to free the railways network from fog-related problems at least Rs 20,000 crore needs to be spent on signalling systems, fencing the railway lines, removing level-crossings and providing safety devices to workmen on the rail tracks," said officials.

The CAG, in a report in 2011, had said the railways suffered a loss of over Rs 3,200 crore for operating on uneconomical routes during 2005-10.

"The railways sustained losses of Rs 3,228 crore in operation of uneconomic branch lines between 2005 and 2010 and the loss on operation of such lines increased to Rs 1,198 crore in 2009-10," the CAG had said.