Signaling the Green Light: Indian rail freight sector on the rise

The Indian Railways is ‘Hungry for Cargo’ and even with the ever increasing numbers of revenue and volumes handled per year, the hunger does seem to satiate yet. There has been an aggressive approach towards improving the share of railways in the modal basket of transportation when it comes to moving freight across and outside the country. The Indian Railways has established one of the world’s largest and most intricate networks for passenger movement and is now eyeing the cargo movement segment in order to enhance earnings and eventually, growth all with strong support from the Government of India. In this feature story, we take a brief run-through of how things are looking for the Indian rail freight sector.

When it comes to rail as a mode of transportation for the movement of cargo, Indian Railways is a synonym as it holds a dominance in the sector with few to no other players. That being said, Indian Railways is on the path to becoming the dark horse of India’s supply chain and logistics industry, on the back of commendable endeavours towards modernisation and better efficiency.

In the last 5 years, their growth statistics, in terms of revenue from and volume of cargo handled, have been stunning and have witnessed a notable increase. In early May 2023 data released by the Ministry of Railways showed that the number of rakes used for rail freight movement increased from around 4 lakh per year in FY 2019-20 to more than 5 lakh in FY 2022-23. 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 has recorded 7% higher at INR 13,893 crore as compared to INR 13,011 last year.

One can safely make conclusions that there is a considerable effort being put on the part of the Indian Railways to enhance its infrastructure, services, and connectivity. However, it has still not been able to propel itself forward as a preferred choice for cargo transportation across the nation. And there are a few reasons behind it.

We asked our participating experts for their opinions.

Dr. Surendra Ahirwar, Joint Secretary – DPIIT, Ministry of Commerce and Industry shared, “If I talk about the major one, it is just the capacity – the capital expenditure which goes into the railways sector. We tend to utilise something that is available – if it is available in abundance, I will use it in abundance. Therefore, there is a greater chance of users opting for roads for freight movement, rather than rail. The biggest determinant of modal share of railways is investment in infra development and also having adequate capability to spend that money and implement the infrastructure appropriately.”

On the other hand, Lalit Chandra Trivedi, Railway expert and Former General Manager – East Central Railway (Patna) provided his view of the challenges and said, “The Government is keen to increase rail share in the country’s transportation pie from the present level of 28% to 45% by 2050. For the near future, the government has kept a target of 3000 million tonnes by 2027. This will mean that the rail sector needs to gear up for a loading level of 7500 million MT by 2050 i.e. the loading level which was 1500 million tonnes in FY23 needs to increase 5 times. The major challenge staring at the rail freight sector is to find replacement of coal, which today accounts for more than 50% of loading and revenue.”

Practically summing up the effects of the shortcomings, Vinayak Gupta, Vice President, AVG Logistics lists a few challenges as “Erroneous ETAs, manual updates, empty railcar tracking, and primitive systems.”

All the points presented above are completely valid and true to reality. Coal is, in fact, the commodity most transported via India’s railway network. In April 2023, coal loading was recorded at 62.39 MT, followed by 14.49 MT in iron ore, 12.60 MT in cement, 9.03 MT in balance other goods, 6.74 MT containers, 5.64 MT steel, 5.11 MT food grains, 4.05 MT mineral oil and 3.90 MT in fertilizers.

However, with the push towards renewable energy increasing by the day, coal freight is bound to reduce – even if that is a slow, gradual process. Additionally, there is a need to capture traffic presently moving by road to ensure higher earnings for rail, as well as reduced carbon emissions. But that will take a lot of investment and effort on the part of rail infra development.

Dr Ahirwar mentioned while talking to us, that for the development of roadways, there are almost 36 government departments (including the Center), which are working towards creating road infrastructure. Plus, on an average, roughly around INR 6L Crore of capital investment happens in the road sector all around the country. Compared to that, there is only 1 ministry and on an average INR 1.25-1.5L Crore capital investment across the country when it comes to rail network. This is a stark difference, and it definitely shows. Until fixed, this will continue to hold back the desired growth of the rail freight sector.

This is the abridged version of the Special Feature that was published in the June issue of Logistics Insider magazine. To read the complete story, click here.

Leave a Reply

Your email address will not be published. Required fields are marked *