Increasing the share of freight is a long road for the railroad

In March 2023, during the last budget session of Parliament, Minister of Rail Ashwini Vaishnaw reported on the progress of two of the railroad’s most ambitious plans, the Eastern and Western Dedicated Freight Corridors (DFCs).

He had said that so far 66.27 per cent (886 km of the total 1,337 km) of the east DFC and 57.30 per cent (863 km of the 1,506 km) of the west DFC have been commissioned with a cumulative capital expenditure of Rs.99,872 crore.

While these numbers sound impressive, the fact remains that the railroads announced the creation of DTCs in 2005-2006. Progress has been steady but slow, and much remains to be done to develop the ecosystem for faster freight transport and push logistic companies to choose rail over highway for long-distance shipments.

“The share of rail freight could fall even further. Aside from heavy freight traffic, despite the 2016 target of doubling the average speed of freight and passenger trains, other freight could shift off the trains due to the lower speed and efficiency of freight trains,” said Alok Kumar Verma, former chief engineer at Indian Railway Engineering Service.

“In order to increase the share of freight transported by rail, it is crucial to strengthen the rail network system and create efficient warehouses,” said Suprio Banerjee, Vice President and Sector Head – Corporate Ratings, ICRA Limited. “Nevertheless, the pace of growth in ecosystem development will depend on the pace of infrastructure activity development and the competitiveness of rail freight services.”

According to the National Rail Plan (NRP) 2020, the goal is to increase rail’s modal share of the logistics market to 40-45% to transport 3,600 million tonnes (MT) of freight by 2030-31. The current share of rail freight is 26%, with a freight load of 1,512 tonnes recorded in FY23.

Rail freight costs the least at 1.6 rupees per tonne-kilometre. In comparison, waterways cost 2 rupees, roads 3.6 rupees and air freight topped the list at 18 rupees, according to a 2022 report by NITI Aayog.

The IR freight basket is limited and highly skewed compared to the overall logistics market as it is heavily dependent on coal, iron ore/steel, cement, food grain and fertilizer and accounts for almost 74% of freight volume.

“What Indian railways need is a more dynamic and customer-friendly approach to organizing commercial customers,” said Vinayak Chatterjee, Founder and Executive Trustee of the Infravision Foundation.

While most stakeholders believe DFCs will reduce transit time and logistics costs, others, like Verma, believe this is not a sustainable idea due to poor capacity utilization.

“DFC is a deeply flawed idea that runs counter to the general practice around the world of building new, purpose-built passenger lines to achieve higher speeds while using the existing lines to carry freight trains and regular passenger trains,” he said Verma, adding what India immediately said the need consists of at least 10,000 kilometers of new dedicated passenger lines to meet demand.

“With one network for heavy freight trains and a separate, separate network for standard gauge high-speed trains, it’s going to be difficult to operate the huge IR network, and where is the money going to come from for three separate networks?” asked Verma.

Nearly Rs.11,306 crore was allocated for doubling the lines in 2015, of which only Rs.2,950 crore was used, according to budget documents.

Beginning in 2016, there was a noticeable decline in funds allocated and utilized to double, and only increases in funds and utilization were seen post-pandemic.

The average doubling of commissioning between 2009 and 2014 was 375 km per year, which increased to 1394 km per year in the period 2014-2022, according to a December 2022 MoR press release. About 30,794 crore rupees are earmarked for doubling the lines this year.

Experts also argued that rail freight transport is less favored in India due to a lack of flexibility and last-mile connectivity, emphasizing an integrated logistics approach that can enable better visibility and control of goods movement and reliability of supply chains.

“There are still challenges in terms of high throughput times, adequate and mechanized infrastructure for the port sector, poor warehouse condition for goods storage, high fuel costs, lack of technical and advanced skills, etc., which need to be more efficient and cost-competitive,” said Banerjee .

Outdated technology and infrastructure as well as complex regulatory processes are other challenges pointed out by global players in this market.

“Countries with well-developed rail freight systems have made significant investments in infrastructure with dedicated freight corridors, modern terminals and efficient intermodal connectivity,” said Vikash Agarwal, Managing Director of Maersk South Asia.

Agarwal said that simplifying and speeding up the processes related to rail freight, including documentation, customs clearance and intermodal connectivity, can help further increase the share of freight transported by rail in India.

By creatively structuring the public-private partnership model to encourage private sector involvement, India can increase efficiency, technology adoption and investment in rail freight infrastructure, Chatterjee said.

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