Can rationalization of container tariffs increase the modal share for rail freight?

According to recent data released by the Ministry of Railways, the use of rail freight rakes for the year 2022-23 reached more than 5 lakh, exhibiting a healthy year-on-year growth. In April 2023, the Indian Railways recorded monthly freight loading of 126.46 million tonnes – a 4.25 MT and 3.5% growth over April 2022. Freight revenue in April was recorded 7% higher at INR 13,893 crore as compared to Rs 13,011 last year. 

To further augment the share of railways in the entire gamut of the logistics industry, the Indian Railways is on the verge of finalizing new policy initiatives and rating structures, that include more commodities in the freight basket. Conventionally, rail freight has been used for transporting bulk commodities like coal, steel, cement, etc. 

However, lately many e-commerce, FMCG, electronics and other companies are using rail freight for parcel and non-conventional goods deliveries too. Indian Railways is working towards including more non-rail freight commodities in order to increase its loading per day numbers from 4 to 6 million MT per day in the next 2 years. 

The new policy will also introduce new kinds of carriers like double stack dwarf containers, cube containers, and open top containers. It will also rationalize container rates to bring more harmony in the container ecosystem. The Railways plans to rely on containerization to attract other goods and increase domestic container movement substantially. 

With cost being a significant factor in deciding the mode of transportation, this decision of rationalisation of tariffs will be instrumental in increasing the share of rail in the modal basket. Plus, it will also help companies reduce their supply chain emissions, thus, moving them closer to their sustainability goals. This will have a twin effect on the competitiveness of railways in comparison to road transportation.

Additionally, the introduction of new types of containers can increase the volume and variety of goods that can be transported via rail, making it more appealing to shippers. 

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