Buoyed by an impressive turn around, Railway Minister Lalu Prasad Yadav is likely to go in for a nominal reduction in passenger fares and rationalisation of freight rates in the 'people friendly' Rail Budget to be presented in Parliament on Tuesday.

This will be fourth year in a row that is expected to see Prasad not hiking the passenger fares. Sources said 26 new projects may be announced in the Budget which the railway minister said will be 'people friendly'.

The railways' 'major turnaround' in financial and technical performance came in for special mention from President Pratibha Patil in her address to Parliament on Monday.

While passenger fares may be reduced by three to five per cent, freight rates for petroleum, steel and iron ore can come down by three to four per cent, sources said.

The reduction is being contemplated as the Railways have managed to cut operational costs while increasing revenue through volume growth, they said.

While freight earnings have risen by 11 per cent, passenger revenue has gone up by 14 per cent during April 2007 to January 2008 providing enough scope to Prasad to go for fare reduction.

The cut in fares is likely to cover all classes while suburban fares may be rationalised. As far as freight is concerned, Railways would continue with its rationalisation policy as observed in the past three budgets.

Enthused by the performance, Prasad has said his Budget would bring "a basket of comforts for the common passengers." 

Railways is also likely to announce some concessional schemes for elders, women, sports persons and students. There could be some incentives for porters who form a large part of the rail work force and have been demanding Class IV status.

Sources said the Phase II of Mumbai Urban Transport Project, aimed at decongesting the crowded stations of Mumbai suburban stations, is likely to get a substantial amount in the Budget.

With the total revenue of more than Rs 57,000 crore (Rs 570 billion), Railways' profit may touch an all time high of about Rs 23,000 crore (Rs 230 billion) this year as against Rs 20,000 crore (Rs 200 billion) last year.

The total plan outlay in the coming Rail Budget is likely to be around Rs 36,000 crore (Rs 360 billion) while Railways is expected to generate a substantial revenue to meet the growing expenditure through public-private partnership.

"This time the focus is likely to be mostly on meeting expenditure through internal resources," said a senior Railway official.

The Budget is expected to strengthen services in backward regions, including North-East states. Some new lines are to be sanctioned for North East.

Bihar, Yadav's home state, could be the biggest beneficiary of the budget. It may bag the maximum number of the new projects.

Provisions for generating funds for the development of Dedicated Freight Corridor project is also likely to be spelt out, the sources said.

Another proposed project that may draw special attention of the minister is the the 1300-km long Delhi to Sealdah eastern corridor of the DFC project.