The ticket pricing for trains is based on distance. To cover the costs incurred in the Konkan railway ( It was not exactly a Government operation), IR is charging more fares in KR. Effectively, passengers travelling on KR have to pay more per KM than the rest of the country. Since the fare structure for IR is already fixed, instead of creating a separate fare structure just for KR, IR just reports that distance as higher than the actual number.
For example, if a person wishes to travel for 100 KM and the fare structure is 1 rupee per KM, i.e., 100Rs for the journey (Actual fare structure is different, but this should give you a...
more... basic idea), since IR wishes to charge more for KR travelers ( say 1.50 rupees per KM i.e, 150Rs for the journey), instead of changing the fare structure, they will report the distance as 150 KM so that effectively they still get 150 Rs for the journey while the fare is 1 rupee per KM like for the rest of the country. This way, they can use the same PRS software and when someone has 1 part of their Journey outside KR and one part within KR, calculating the fare will be easier.