Fathima (41) who suffered 40 per cent burns, succumbed to her injuries at Kozhikode Medical College late last night, police said.
Railway Superintendent of Police V O Mohanan, who was entrusted with the probe, inspected the compartment where the incident occurred around 4.40 AM yesterday.
A 23-year-old man suspected to be involved was absconding after the incident, reportedly a sequel to a dispute over certain cash transactions between him and Fathima, police said.
The man had allegedly set her on fire after emptying a liquor bottle on her and escaped in the melee.
The victim, hailing from Kondotti in Malappuram, was rushed to a district hospital here and later to Kozhikode medical college hospital, where she succumbed to burns.
Following the incident, the compartment was detached and the train had left for its onward journey.