In a major policy decision, railways has decided to hike service tax on transportation of goods. This decision has been taken at the directive of revenue department under the ministry of finance.

According to a Railway Board official, railways wanted to hike this levy from January 1, 2012 itself on all goods being transported by it across the country. However, railways has kept it in abeyance till March 31, 2012 following the ministry's fresh notification, he said, adding the levy hike was due for a long time.

A Board official said railways has been charging about 10% service tax presently, while education cess is 2% and higher education cess is 1%. Railways now intends to impose about 3.09% more service tax on the goods transport by railways, he said .

Sources said freight is the mainstay of railways. Though road transport charges have gone up steeply during the past few years, the railways has not increased its freight charges much.

According to sources, railways has been passing through a critical phase due to acute resource crunch. The cost of petroleum products has increased many times, they said, adding railways has also been incurring a huge expenditure towards salary payment of its officials and employees.

A Board official admitted that railways could not take up various ambitious projects due to acute resource crunch. The old and worn out rolling stock (bogies) is not being replaced on a priority basis from safety point of view mainly due to resource crunch. However, railways is keen to take up various pending projects on public private partnership (PPP) basis, he said.

Meanwhile, ministry of finance has been exerting pressure on railways to increase passenger fare charges this time. There is a possibility of freight and fare charges being hiked in the ensuing railway budget for 2012-2013 fiscal, sources said.