Buoyed by an impressive turnaround, Railway Minister Lalu Prasad 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."