An expert group on modernisation of railways has suggested a per km surcharge on passenger fare and disinvestment of railway-controlled enterprises to help the country's largest employer generate funds to spruce up its operations.

"We are looking at a fivepronged strategy including modernising core assets, reviewing existing projects and exploring newer revenue generating models," Sam Pitroda, who heads the panel, said on Monday.

In its report to the rail ministry, the panel has said the railways will need an investment of about Rs 8 lakh crore over the next five years to revamp its functioning. The panel was set up in September.

The panel's report envisages a budgetary support of Rs2.5 lakh crore. Railways is also looking at revenue generation of over Rs2 lakh crore through internal resources. Another Rs 2.3 lakh crore is expected through projects in public-private partnership (PPP) mode, while dividend rebate and road safety fund will contribute about Rs 40,000 crore.

Pitroda said he expects the railways' contribution to the GDP to rise to 2% in the next four to five years, from 1.2% at present. The panel report said that areas such as tracks and bridges, signalling and rolling stock would together entail an investment of over Rs1 lakh crore.

There is an immediate need to modernise 100 railway stations and set up 34 multi-modal logistic parks, it said. According to the report, about Rs1,500 crore would be needed to implement IT-related services like Real Time Information System on trains and RFID technology for wagons, along with internet access at 342 railway stations.

Captive power, renewable energy projects, elevated rail corridors and private freight terminals would be the potential areas for projects in the PPP mode.

Some of its other recommendations include adding a new member to its board to look at PPP projects, having an official to resolve disputes and formation of railway tariff regulatory authority to ensure a level-playing field.