Efficiency and competitiveness of Indian Railways

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IMPROVING RAIL EFFICIENCY and
SHARE IN INDIA’S FREIGHT TRANSPORT
Acknowledgement
This study was carried out with the financial support of NITI Aayog, Government of India,
and conducted by Bureau of Research on Industry and Economic Fundamentals (BRIEF).
Disclaimer
Bureau of Research on Industry and Economic Fundamentals (BRIEF) has received the financial assistance under
the Research Scheme of NITI Aayog (RSNA-2018) to prepare this report. While due care has been exercised to
prepare this report using the data from various sources, NITI Aayog does not confirm authenticity of the data
and accuracy of the methodology to prepare the report. NITI Aayog shall not be held responsible for findings or
opinions expressed in the document. This responsibility completely rests with BRIEF. Acknowledgement
We express our sincere gratitude to Niti Aayog for providing Bureau of
Research on Industry and Economic Fundamentals (BRIEF) the financial
assistance under the Research Scheme of NITI Aayog (RSNA-2018) to
prepare this report.
We sincerely thank the Infrastructure Connectivity team at Niti Aayog
for supporting us ever since we began this research and for proactively
connecting us with relevant stakeholders.
We would like to specially thank Late Shri S.K. Saha, former Adviser; Shri
Sudhendu J. Sinha, Adviser; Shri M. Vijayakumar, Joint Adviser and Shri
S.M. Khan, Senior Research Officer for sharing with us their insights and
providing us valuable feedback during the course of the research. Contents
References 107
Annexures 111
1
CHAPTER 1: Scope and Overview 13
Abbreviations 7
Executive Summary 9
CHAPTER 2: Background 17
2
CHAPTER 3: Approach and Methodology 23
3.1 Multi-stakeholder Engagements 26
3.2 Data Collection and Compilation 27
3
CHAPTER 4: As-Is Assessment 29
4.1 Baseline Trends of Movement by Rail 30
4.1.1 Freight Volume Forecast 36
4.2 Comparative Cost Analysis Road and Rail 38
4.3 International benchmarking and best practices 44
4.3.1 Logistics Performance Index 45
4.3.2 Logistics Cost as a Share of GDP 46
4.4 Turning Crisis into an opportunity: Initiatives Taken by Indian
Railways during Covid-19 48
4
CHAPTER 5: Product Matrix and Sector Specific Case Studies 53
5.1 The Product Matrix 54
5.2 Case Study 1: Automobile 61
5.3 Case Study 2: Cement 69
5.4 Case Study 3: Food grains 75
5
CHAPTER 6: Challenges and Reforms 81
6.1 Challenges in the modal shift to Rail 82
6.1.1 Operational Efficiency 83
6.1.2 Suboptimal Infrastructure 84
6.1.3 Lack of Integrated Connectivity (First Mile and Last Mile) 86
6.2 Roadmap for Reforms 87
6.2.1 Overall Recommendations to Increase Share of Rail in
Domestic Freight 91
6.2.2 Sector Specific Reforms 99
6 7
AbbreviationDetail
3PL Third Party Logistics
AAR Association of American Railroads
ADB Asian Development Bank
AFTO Auto Freight Traffic Operator
CAGR Compound Annual Growth Rate
CFS Container Freight Stations
CMA Cement Manufacturing Association
CO
2
Carbon dioxide
CONCOR Container Corporation
CTO Container Train Operator
DFC Dedicated Freight Corridor
DFCCIL Dedicated Freight Corridor Corporation of India
EDFC The Eastern Dedicated Freight Corridor
EXIM Export-Import
FCI Food Corporation of India
FIEO The Federation of Indian Export Organisations
FMCG Fast Moving Customer Goods
FY Financial Year
GDP Gross Domestic Product
GVA Gross Value Added
ICD Inland Container Depot
INR Indian Rupees
IT Information Technology
JNPT Jawaharlal Nehru Port Trust
Kgs Kilograms
Km Kilometre
KMPH Kilometre Per hour
LTTC Long Term Tariff Contract 8IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
MMLPs Multi-Modal Logistics Parks
MT Metric Tonnes
NHAI National Highways Authority of India
NHs National Highways
NMG New Modified Goods
NSSO National Sample Survey Office
NTKM Net Tonne Kilometre
OCR Optical Character Recognition
OECD The Organisation for Economic Co-operation and Development
OEM Original Equipment Manufacturer
Pol Mineral Oil
RDSO Research Designs and Standards Organisation
RFID Radio Frequency Identification
RO-RO Roll-on, Roll-off
RTT Round Trip Traffic
SIAM Society of Indian Automobile Manufacturers
SUV Sports Utility Vehicle
TEUs Twenty Feet Equivalent Units
USD US Dollar 9
Executive Summary
An efficient supply chain management
requires a coordinated and integrated
logistics system. The increased adoption
of railways as a mode for cargo
movement is crucial for improving
India’s logistics services. Currently, the
modal mix in terms of freight movement
is considerably skewed towards road
transport. The effect is an increased
burden on roads, and therefore, significant
congestion, increased pollution, and
resultant logistics cost escalations. At
this juncture, it is important to strengthen
the railways for the cost-effective and
clean movement of a broad commodity
base. This report comprehensively covers
the current performance of the railways,
the various initiatives taken to increase
freight, global scenario, challenges
faced/gaps to be bridged, perceptions
of stakeholders, and recommendations
to assist the policy establishment in the
process of exercising necessary reforms.
In the context of increasing the share of
rail in domestic freight movement and
improving rail efficiency, this project was
envisaged to be undertaken in four stages
– situational assessment, engagements,
analysis, and delivery. The analysis is
based on primary surveys using the
Delphi technique. Detailed discussions
with relevant departments and key
stakeholders – policy establishments,
government bodies, business chambers/
associations, logistics players, importers/
exporters, etc. have been conducted for
this report. The report gathers incisive
insights on the current status of rail
infrastructure and operations, reasons
for below-par adoption of railways as a
mode for freight transport, bottlenecks
faced in cargo movement through
rail due to sub-optimal infrastructure,
operational inefficiency, issues faced in
first and last-mile connectivity, the role
of private players, issues faced in multi-
modal transport, etc. Indian Railways has
been taking several initiatives to address
the challenges and boost the rail share,
such as the special parcel trains for
transportation of perishable goods and
essentials commodities.
Considerable thrust of the research has
been placed on global railway systems,
world-class stations, fully integrated rail
network connecting remote areas, and
improved safety standards, focusing
on increasing the share of railways in
the modal mix to meet international
benchmarks. The report delves deep
into global best practices and gathers
stakeholder views on the possible
measures to be undertaken. In several
countries, Public-Private Partnership (PPP)
model is widely adopted, wherein various
segments of the railway operations and
infrastructure are outsourced to the
private players. For instance, the private
business rents some specific physical
assets, such as rolling stock, which saves
the railway from financing those assets
itself. In 2003, Russia began allowing the
private sector to rent freight wagons to
the railway, making it profitable through 10IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
a change in tariff rules. The new policy
created a vibrant market where the
private sector provided USD 50 billion
toward replacing the railway’s extensive
stock of old wagons. As a result, 85
percent of Russia’s freight wagons are
owned by the private sector. Besides,
the private sector can sell services to
the railway, such as track maintenance.
In such cases, the investor deploys its
equipment and facilities, finances the
working capital involved, and provides
the labour to the railways.
The report focuses on the product mix
of Indian Railways, which has been
skewed towards the movement of bulk
commodities such as coal, cement, iron
ore, steel, petroleum, foodgrains, and
fertilizers. In 2018-19, coal constituted 50
percent of the total freight movement
of 1,221 million tonnes, followed by Iron
Ore (11%), Cement (10%), Mineral Oil
(4%), Fertilizers (4%), Iron & Steel (4%),
Foodgrains (3%), Limestone and Dolomite
(2%), Stones (including gypsum) other
than marble (2%) and other commodities
(9%). The challenges faced in movement
of containers via rail, and low share in
domestic container movement have been
discussed. The report conducts sector-
specific case studies to understand
the dynamics for select sectors’ goods
movement, including Automobile,
Cement, and Foodgrains. The study also
analysed the challenges- infrastructural,
operational, and end-to-end connectivity
and suggests actionable reforms based
on stakeholders’ discussions for these
sectors. For example, in the automobile
sector, despite a rise in automobile
transportation by rail in the last few years,
the share of railways in the automobile
movement has been significantly low. In
the passenger vehicle segment, almost
95 percent of the transportation occurs
via roads. To increase the freight traffic
for this sector, Indian Railways can tap
into the Sports Utility Vehicles (SUVs)
and two-wheeler segment traffic by
modifying the wagon design to allow
double stacking SUVs and allow side
loading of two-wheelers.
The national transporter faces
several infrastructural, operational,
and connectivity challenges leading
to a shift of freight traffic to roads.
Stakeholder discussions reveal that it
takes approximately 2-3 days longer
for transportation via rail than the road
along the major routes. The increased
transit time by rail and pre-movement
and post-movement procedural delays
such as wagon placement, loading and
unloading operations, multi-modal
handing, etc., hamper freight movement
by rail. Lack of necessary terminal
infrastructure, maintenance of good
sheds and warehouses, and uncertain
supply of wagons are some of the
infrastructural challenges faced by the
customers. This results in high network
congestion, lower service levels, and
increased transit time. The absence of
integrated first and last-mile connectivity
in rail increases the chances of damage
due to multiple handling and increases
the inventory holding cost. Shippers
expect greater service levels and proper handling of their goods. Absence of
timetabled services, inconsistent supply
of rakes, and lack of integrated first and
last-mile connectivity impacts the transit
time and increases the cost of freight
operations for the customers.
Based on the identified challenges, the
report suggests a roadmap of reforms
to increase the domestic rail share and
improve efficiency. The private sector
can play an important role in enhancing
operational efficiency and strengthening
the rail infrastructure through Public-
Private Partnerships (PPPs). Operational
efficiency for loading/unloading,
warehousing management, station
services, automation, and digitization of
various processes could be outsourced
to the private sector. Similarly, for first
and last-mile connectivity, a separate
entity can be created by the railways in
partnership with the private sector as a
single point of contact for customers to
handle multiple legs of movement and
ensure smooth transportation of goods.
The report proposes a revenue model
based on stakeholders’ discussions - a PPP
model is suggested for a few dedicated
container freight trains from point to
point based on the Build-Own-Operate
approach. An Uber-like model for cargo
wagons in passenger trains, wherein the
customers can book the wagon using an
online application, is also proposed in the
reforms section. To enhance efficiency in
the rolling stock maintenance process,
railways can increase the validity of brake
power certificate for the rakes. There is
significant potential in improving the rail
efficiency and percentage of rail freight
in the domestic freight. The suggested
reforms will address some of the major
challenges faced by the Indian Railways
to ensure seamless rail freight operations,
increase in the share of rail freight in the
modal mix, and subsequently, increased
revenues for railways. Scope and
Overview
CHAPTER 1 14IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
To study the modal share pattern and
understand the rail freight patterns
To conduct international benchmarking
and document best practices in rail
freight movement
To outline the challenges in modal shift
to rail
To undertake interactions with multiple
stakholders in the ecosystem
To prepare case studies on select sectors
which can potentially ensure increased
traffic for railways
To prepare a roadmap for reforms to
increase modal share of rail in freight
movement
SCOPE AND OBJECTIVES
Indian Railways, the nation’s lifeline,
connecting people and moving cargo,
plays a vital role in the country’s logistics.
Over the years, it has witnessed a significant
increase in passenger and freight segment
traffic. However, the investment in rail
infrastructure has not matched the pace
with the increasing traffic. The focus of
the Indian Railways has been on carrying
bulk-commodities. It has led to a loss in the
uptake of commodities that often move in
smaller lot sizes. The national transporter
faces several challenges affecting
customer satisfaction and discouraging
them from using rail.
Railways in India has been losing freight
share to other competitive and flexible
modes such as the roads over the years.
High logistics cost remains a challenge for
the business community in the country.
Estimated at 14 percent of the GDP, the
logistics cost is one of the highest compared
to many developed countries. Based on
studies, the country’s savings would be
USD 50 billion if this cost comes down to 9
percent and would lower many products’
prices.
1
Transportation cost accounts for
the majority of the overall logistics cost.
Hence, it is necessary to strengthen the rail
transportation, as it is cheaper and more
energy-efficient than the other modes.
Upgrading and expanding the railway
infrastructure, improving operational
efficiency, and providing end-to-end
connectivity to create customer confidence
will help in enhancing the freight traffic.
This study analyses rail and road freight
share over the years and understands why
the shift in freight traffic from rail to road. It
deep dives into the freight and passenger
1. Addressing India’s high logistics cost. Business Line. 2017. https://www.thehindubusinessline.com/opinion/addressing-
indias-high-logistics-costs/article9732208.ece 15
segments of the railways by analysing the
various parameters such as the revenue
stream from these segments, growth in
rolling stock infrastructure, interpreting
Indian Railways financial performance
through the operating ratio and the high
time required for wagon maintenance. A
detailed comparison of various measures
such as the fare-to-freight ratio, logistics
performance index, operating ratio, etc.,
of Indian Railways with other countries
is performed in the International
Benchmarking section. India’s low rail
freight share and fare-to-freight ratio,
and high operating ratio compared to
the developed nations suggests that
increasing the rail modal will require
consistent efforts. However, Covid-19
appears to be a turning point in the freight
transportation of the country. Despite the
unprecedented challenges because of the
pandemic, impacting global and domestic
supply chains - the Indian Railways
utilised it as an opportunity to serve the
various industries.
The section on product matrix analyses
the shares of a range of goods transported
via rail, including the freight movement
of industrial outputs like coal, cement,
iron ore, steel, petroleum, food grains,
fertilizers, and containers. A detailed
analysis of sector-specific case studies
on automobile, cement, and, foodgrains
is presented in this section to understand
the different challenges faced by these
sectors in using rail for movement of goods
and suggest insightful ways to increase
the freight domestic share of railways.
The report explains the challenges faced
by different industry players to transport
goods by rail, and the limitations of
Indian Railways. It presents a common
ground to address the issues based on
discussions with stakeholders at multiple
levels & suggests reforms to increase
the rail freight volumes – with the right
investment, technological developments,
and modifications in the existing policies.
While the obstacles seem daunting, there
is potential to overcome them through
the right reforms and best practices. It is
essential to understand each industry’s
distinct nature and focus on the specific
requirements to improve the ease of
transporting via rail.
scope and overview Background
CHAPTER 2 18IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
2. National Rail Plan – India. Ministry of Railways, RITES.
3. Enhancing the efficiency of freight movement. Shakti Sustainable Energy Foundation. 2016. https://shaktifoundation.in/
work/transport/freight-movement/
4. Freight On Road: Why EU Shippers Prefer Truck To Train. European Parliament. 2015.
5. India Logistics & Warehousing. Knight Frank. 2014.
A well-established transport system is an
integral part of a country, not just to connect
people but also to move goods. The modes
of transportation have changed with time
depending upon people’s behaviour, income,
technology, and demand for goods. The
movement of freight is a prime component
of all supply-chains and logistics systems.
In FY18, the total freight transportation was
4,464 million tonnes across India.
2
The freight
movement is dominated by road, accounting
for 65 percent of the freight movement, 26
percent by rail and the remaining by modes
such as coastal shipping, inland waterways,
pipeline and air.
3
In the coming years, the
country’s freight logistics sector is expected
to grow at a rate of 6-7% annually. Due to
the various infrastructural, operational and
end-to-end connectivity challenges faced
by the Indian Railways, it has continuously
lost modal share in freight transportation.
Freight transportation depends on various
factors such as shipper attributes (size and
location), product attributes (type, value,
volume, size, weight and perishability),
the distance between the origin and
destination, and the flow rate of frequency
at which transportation is required. The
decision to choose transportation mode
is shaped by cost, accessibility, transit
time, reliability, frequency, and flexibility.
A premium is placed on flexibility to move
goods as the cost and transit time can be
reduced if the mode is flexible. Since the
roadways are the most flexible in providing
door-to-door service, India’s reliance on
the roads is much higher than rail, water
and air.
4
There has been a gradual shift to
move goods from rail to the road over time,
even for goods traditionally moved by rail.
With growing industries and the
e-commerce market, the logistics demand
is changing everywhere. As supply chains
become more globally dispersed, the
quality of a country’s logistics services can
determine whether or not it can participate
in the global economy. The logistics value
chain includes three units – transportation,
warehousing, and administration. A majority
of the logistic costs comprise transportation
of goods, which provides for end-to-end
movement of goods from the manufacturer
to the customer, accounts for 60 percent
of the total cost.
5
An efficient supply chain
management requires a coordinated and
integrated logistics system. Two critical
aspects required are - efficiency in moving
raw materials to the manufacturing plant
and quickly moving out finished goods to
the end consumer.
The Indian logistics industry stood at USD 160
billion in 2019 and has grown at a compound
annual growth rate (CAGR) of 7.8 percent
during the last five years. Logistics costs in
India are 13-15 percent of the product cost,
much higher than the global average of
6 percent. In 2018, India ranked 44 in the
World Bank Logistics Performance Index
(LPI) across 160 countries. However, India’s 19
LPI rank has varied over the years, from the
mid-40s in 2010 to 54 in 2014 and improved
to 35 in 2016.
6
Logistics Cost as a Percentage of GDP
6. Logistics on the Move. The Business Today. 2019. https://www.businesstoday.in/magazine/special-reports/logistics/on-
the-move/story/337229
7. When it comes to moving things, Indians just hit the road. Live mint. 2017. https://www.livemint.com/Money/
fzAZ8hyYWauiQkWVOrMesI/When-it-comes-to-moving-things-Indians-just-hit-the-road.html
8. Indian Railways Yearbook. Ministry of Railways
9. Indian railways: Network, investments, market size, govt initiatives. 2020. https://www.ibef.org/industry/indian-railways.aspx
14%
India
10%
USA
9%
Germany
11%
Japan
Background
spread over 1.2 million km and an employee
base of 1.3 million. With two major segments,
passenger and freight, it runs over 13,000
passenger trains and 9,000 freight trains,
carrying around 23 million passengers and
3.3 million tonnes of freight every day from
7,349 stations (2018-19).
8
Indian Railways
target is to increase its freight traffic to 3.3
billion tonnes by 2030 from 1.2 billion tonnes
in 2019. It is projected that the freight traffic
will further increase after the commissioning
of the Dedicated Freight Corridors (DFCs).
9

Among the various modes, railways and
waterways play a dominant role in meeting
transport requirements for long-distance
and bulk commodity movement. Road freight
provides greater accessibility in terms of
integrated connectivity between two points
and flexibility to transport different volumes
of various product categories. In comparison,
air transport is preferred for time-sensitive
and high-value goods. The share of freight
carried by rail has decreased over time, and
road transportation is gradually increasing
over the years by improving connectivity
between cities, towns, and villages.
A look at the comparable costs of different
forms of transportation suggests that
freight movement cost is highest in the road
sector. It costs around INR 2.5/tonne per
km to transport goods by road, compared
to INR 1.06/tonne per km by water and INR
1.36/tonne per km by railways.
7
However,
the ease and positives of road transport
have taken precedence over the costs.
Trends in Freight Movement
by Mode
Indian railways is the 3
rd
largest railway system
globally, with a vast route length network,
Freight Volume Carried by India’s Rail, Road
and Air transport (million tonne-km)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
35,00,000
30,00,000
25,00,000
20,00,000
15,00,000
10,00,000
5,00,000
–
Road Rail Air
Container Port Traffic in India (TEU: 20
foot equivalent unit)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2019
2018
1,80,00,000
1,60,00,000
1,40,00,000
1,20,00,000
1,00,00,000
80,00,000
60,00,000
40,00,000
20,00,000
–
Source: OECD and World Bank Database
Note – Data estimated for road freight volume for 2018 and 2019
Source: World Bank Database 20IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Sector Wise Infrastructure Investment (INR lakh crore)
India’s road network has expanded vastly in
the last few years as compared to the other
modes such as waterways, air and rail.
The road network has increased from 4.7
million km in 2011 to 5.89 million km in 2020.
Highway construction increased at 21.4
percent CAGR between FY16 to FY19; in FY19,
10,855 km of highways were constructed.
In March 2020, National Highways
Authority of India (NHAI) accomplished
the highest ever highway construction
of 3,979 km. Huge investments are being
made in developing the road sector, with
government policies such as urban road
connectivity, a plan for enhanced road
construction as part of the Bharatmala
project, and the Sagarmala project.
10

However, India’s dependence on roads for
10. Road Infrastructure in India. IBEF. 2021. https://www.ibef.org/industry/roads-india.aspx
11. Indian Railways Re-birth of the Colossus, Edelweiss. 2017
12. Sustainable Freight Transport. https://shaktifoundation.in/work/transport/freight-movement/
freight movement grew at an even faster
pace, with a growth rate of 10.2 percent
per year in the last five years; vehicles’
usage has outpaced the expansion of the
road network. For example, the National
Highways (NHs) constitute 1.6% of the total
Indian road network but carry over 40%
of road-based traffic, making it the most
critical road sector segment.
11
The freight
logistics sector accounts for nearly 7% of
the total carbon dioxide (CO
2
) emissions in
India.
12
This percentage will increase further
as the demand for goods transportation in
the country increases. To curtail emissions
from logistics segment, it is essential to
improve the efficiency of logistics and
encourage a modal shift towards more
cleaner modes, such as the railways.
20
IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
4
4
3
3
2
2
1
1
0
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Roads and bridges Railways Airports Seaports
Source: National Infrastructure pipeline. Department of Economic Affairs, Government of India. Vol-II. 2121
Background
The majority of India’s international trade
occurs through seaports; thus, the quality
of ports is essential to enhance trade.
The public and private sector have made
investments in this sector to improve the
port capacity and connectivity. The cargo
traffic handled by the ports increased at
a CAGR of 5 percent from 1,052 million
tonne to 1,185 million tonne from FY15
to FY19. However, the cargo handling
operational efficiency and productivity
at the Indian ports remains below the
optimal level. Similarly, in the airports
segment, with investments from both the
government and the private sector, India
has seen extensive growth. The country
has become one of the major domestic
civil aviation markets globally, with
immense potential for further growth. The
total air cargo traffic grew at a CAGR of
6.7 percent from FY16 to FY19. However,
due to different challenges faced in
freight transportation, freight carried by
Indian railways, airports and seaports is
significantly lower than the global majors
such as the USA and China.
Railways can carry more than six times the
traffic that could be carried by road by using
the same quantity of fuel. It is cost-effective
and results in lower energy consumption
and CO
2
emissions. However, transportation
by rail currently presents a challenge, as the
requirements of industries are changing. The
reliance on roads has increased overtime
as the road network gradually became
better than the other modes for movement
of goods. Factors such as lack of first and
last-mile connectivity, high transit time, and
limited intermodal connectivity discourage
shippers from using rail for freight movement.
The comparative advantage behind a
modal shift are costs, convenience, speed,
and reliability. The Indian Railways has
been taking many initiatives to improve the
modal share by investing in infrastructural
developments, various schemes and
policies to improve the overall efficiency
of transporting goods. While the share of
Indian Railways in the freight movement
is low, there is significant potential
in improving the rail efficiency and
percentage of rail freight in the country’s
domestic freight.
Freight Carried by Railways
(million tonne-km) in 2019
40,00,000
30,00,000
20,00,000
10,00,000
0
USA
China Russia India
50,000
40,000
30,000
20,000
10,000
0
USA
China Russia India
Source: World Bank DatabaseSource: World Bank DatabaseSource: World Bank Database
Container Port Traffic (million
TEUs) in 2019
250
300
200
150
100
50
0
USA
China Russia India
Freight Carried by Air Transport
(million tonne-km) in 2019 Rail Budget and the National Rail Plan
Rail budget 2021 received a 57 percent increase in allocation from INR 70,000
crore in FY20 to INR 1.10 lakh crore in FY21. The rail budget envisages a future-
ready green Indian Railways by 2030. Indian Railways will focus on bringing
down the logistics cost, commissioning of the Eastern and Western Dedicated
Freight Corridors by 2022, with gradual monetisation of corridor assets and
strengthening the public-private partnership.
The National Rail Plan 2024 and 2030 will seek to rationalise freight tariffs to
compete more effectively with the roadways, reduce transit time and cost,
and achieve net-zero greenhouse gas emissions by 2030. The vision is a
hundred percent electrification of broad gauge routes by 2023, increasing
freight loading capacity to 2,024-million tonnes by 2024 through business
and infrastructure development. The plan focuses on boosting high-speed
rail connectivity in the country on crucial high demand routes.
Source: Railway Budget 2021: New map for future-ready Indian Railways unveiled; highlights. 2021. Approach and
Methodology
CHAPTER 3 24IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
This project was envisaged to be undertaken in four stages – situational assessment,
engagements, analysis and delivery. The following table lists the main activity strands
against each of these stages. The analysis is based on primary surveys using the Delphi
technique, which is a process for obtaining and refining the opinions of a group of
respondents over successive rounds of interviews. The Delphi method is also known as
the estimate-talk-estimate technique (ETE). It is a well-organized and qualitative method
of forecasting by collecting opinions from various experts through several rounds of
interviews. The outcome of the interviews is used to forecast future scenarios, predict an
event’s likelihood, or reach a consensus about a particular topic.
IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Major Stages and Activity Strands
Situational AssessmentEngagements
Preliminary engagements with the policy
establishment and the stakeholders
Detailed study of secondary information
Gathering insights into the short and long
term reform measures to be focussed on
Further finetuning of objectives, if required
Extensive stakeholder interactions
covering important areas
One-to-one discussions with relevant
government departments and key
stakeholders in the EXIM chain 25
Approach and Methodology
AnalysisDelivery
Data analysis on freight movement
patterns and trends, the overall modal
share of rail freight and commodity-
specific movement through rail
Preparation of sector-specific
case studies
Analysis of qualitative information
gathered from stakeholders and
data from relevant agencies
Preparation of report covering the status
of rail freight operations, bottlenecks
faced and practical reform areas for
improving modal share of railways in
freight movement
Workshop and discussion to gather
detailed feedback from stakeholders on
the draft report
Finalisation and submission of the report 26IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Policy
Establishment
Government
bodies
Trade
Bodies
Logistics
players
Logistics
Division at
Ministry of
Commerce and
Industry
Ministry of
Shipping
Ministry of
Railways
Major seaports
Container
Corporation
of India Ltd
(CONCOR)
The Federation
of Indian Export
Organisations
(FIEO)
Business
chambers
(national/local)
Sector-specific
associations –
Society of Indian
Automobile
Manufacturers
(SIAM), Cement
Manufacturing
Association
(CMA)
Importers/
exporters
Associations of
clearing agents
Freight
forwarders
Logistics
divisions of
leading industry
players from
automobiles,
cement, and
food grains
Freight
forwarders
Container
Freight Stations
(CFS)
Inland
Container
Depots (ICD)
* This is a preliminary list, and will be updated as we connect with more stakeholders
Detailed discussions with relevant departments and key stakeholders have been
conducted for the preparation of this report. The table below lists the multi stakeholder
engagements conducted for the report.
3.1 Multi-stakeholder Engagements 27
3.2 Data Collection and Compilation
Data analysis on freight movement
patterns and trends, the overall modal
share of rail freight and commodity-
specific movement through rail has been
done using various primary and secondary
sources. Qualitative information gathered
from stakeholders and primary data from
relevant agencies is detailed in the multi-
stakeholder section (see section 3.1).
Secondary data sources used for the
analysis are listed below:
Indian Railways Yearbook
OECD Database
The World Bank Database
Statista Research and Analysis
Other Academic and Research Studies
(listed as references at the end of the
report)
Approach and Methodology As-Is Assessment
CHAPTER 4 30IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
This chapter does a detailed assessment
of the Indian Railways situation and
establishes the baseline trends of rail
movement over the years. It compares
India’s logistics and operations with global
majors in the international benchmarking
section and presents the opportunities
that Covid-19 has brought.
4.1 Baseline Trends of
Movement by Rail
India is one of the fastest-growing
economies globally, with an economic
size of USD 2.94 trillion in 2019-20.
13
The
economic growth has been accompanied
by a rise in freight movement volume
over the period. The freight transportation
by railways increased at CAGR 3.9
percent from 794 million tonnes in 2008
to 1,221 million tonnes in 2019. However,
the Indian Railways has been facing
several infrastructural and operational
challenges, resulting in slow speed of
trains, congestion, and delay in supply
of rakes, and subsequently high transit
time. Approximately 65 percent of the
high-density sections and 40 percent of
the total sections run at an utilisation rate
of more than 100 percent. The busiest
network connecting the four major
metros - Delhi, Kolkata, Chennai, and
Mumbai (the Golden Quadrilateral) and
diagonals (with the East-West diagonal
extending to Guwahati) account for less
than 16% of the overall route network but
contributes 58 percent of the total freight
and 52 percent of the passenger traffic.
14
Freight traffic is the primary source of
revenue for Indian Railways. Approximately
40 percent of the total trains running
daily on Indian Railways are freight trains,
accounting for more than 65 percent of
the total revenue in FY20.
15
Despite higher
passenger volumes on a shared network,
India has the lowest fare-to-freight ratio
(the ratio of passenger fares and freight
13 The top 25 economies in the world. Investopedia.https://www.investopedia.com/insights/worlds-top-
economies/#:~:text=India%20Nominal%20GDP%3A%20%242.94%20trillion,the%20United%20Kingdom%20and%20France.
14 Indian Railways Re-birth of the Colossus, Edelweiss, 2017
15 Indian Railways Industry Report. 2020. https://www.ibef.org/industry/indian-railways.aspx#:~:text=Indian%20
Railways%20is%20among%20the,freight%20daily%20from%207%2C349%20stations
Freight Volume Carried by Indian Railways
200820092010201120122013201420152016201720182019
Freight Volume
(Million Tonnes)
794 833 888 922 969 1,008 1,052 1,095 1,102 1,106 1,160 1,221
Growth Rate (%) 9% 5% 7% 4% 5% 4% 4% 4% 1% 0% 5% 5%
Source: Indian Railways Yearbook
charges) of 0.3, compared to several other
countries, including Japan (1.9), Germany
(1.5) and China (1.2). The policy choice to
keep the passenger fares low results in
freight overpaying its share due to which
railways posted the lowest operating ratio
of 98.4% in FY18, which improved slightly
to 97.2% in FY19. Over the past decade,
freight rates have increased by 91 percent 31
compared with a 28 percent increase in
passenger rates. The passenger traffic
uses two-thirds of capacity but accounts
for only one-third of the total revenue. Due
to the high freight tariff, the railways have
been steadily losing freight market share.
An estimated increase in permitted axle
load of commercial vehicles by 25 percent
has led to a further reduction in modal
share of railways in freight transport.
16
Moreover, the investment in
infrastructural development in railways
16 Govt may Task Aviation Regulator to Fix Railway Passenger Fares, Freight Rates. Business Line. 2020. https://www.
thehindubusinessline.com/economy/logistics/govt-may-task-aviation-regulator-to-fix-railway-passenger-fares-
and-freight-rates/article32223556.ece
17. Mattoo, Ajita. Indian railways: Agenda for reform. Economic and Political Weekly. 2000.
Indian Railways Revenue Break-up by Segment, 2019
3.66%
2.36%
26.90%
67.09%
Freight
Passenger
Other Coaching
Sundry
As-Is Assessment
Snapshot of Key Indicators: Indian Railways
has not kept pace with the traffic resulting
in congestion at the over utilised routes.
There has been an addition of only 13,000
km to route length since 1950-51, which
is less than 0.5 percent per annum, while
the economy’s growth has been over
4.5 percent per annum. With the slow
expansion of the rail infrastructure, the
introduction of each new passenger
service has been at the cost of freight
traffic.
17
As a result, railways have been
facing stress, and significant routes face
congestion and oversaturation. 32IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Railway Earnings: Freight vs Passenger
1,40,000
1,20,000
1,00,000
80,000
60,000
40,000
20,000
1950-51
1960-61
1970-71
1980-81
1990-91
2000-01
2008-09
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
-
Passenger Earnings (INR crores) Freight Earnings (INR crores)
Line Capacity (in thousands)
12012%
10%
8%
6%
4%
2%
0%
-2%
100
80
60
40
Route (Kms)
Route (Kms) Growth RateRunning Track (Kms) Growth Rate
Running Track (Kms)
20
0
1950-51
1960-61
1970-71
1980-81
1990-91
2000-01
2008-09
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
Rolling Stock: Wagons (units in thousands)
450
206
308
384
401
346
222
213
230
239245253254251
278279
289
400
350
300
250
200
150
100
50
0
1950-51
1960-61
1970-71
1980-81
1990-91
2000-01
2008-09
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19 33
Rolling Stock: Locomotives (units)
15,000
10,000
5,000
0
1950-51
1960-61
1970-71
1980-81
1990-91
2000-01
2008-09
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
Steam DieselElectric
As-Is Assessment
Wagon Utilisation: Total Carrying Capacity (Million Tonnes)
18.012%
16.0
14.0
10%
12.08%
13.4
4%
5%
2%
2%
4%
0%
11%
14.1 14.3 14.4
16.0
16.3
17.0
10.0
6%
8.0
6.04%
4.0
2.0
2%
0.0
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
0%
Average Passenger and Freight Rate, and Fare to Freight Ratio
2.000.6
0.4
0.2
0.0
1.50
1.00
0.50
0.00
Rate
Ratio
1950-51
1960-61
1970-71
1980-81
1990-91
2000-01
2008-09
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
Average rate per passenger-km. (in Rs) Average rate TKM for Freight (in Rs)
Passenger Rate to Freight Ratio 34IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Average Freight Train Speed (km/hr)
1950-51
1960-61
1970-71
1980-81
1990-91
2000-01
2008-09
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
30
17.4
16.1
17.9
19.7
22.7
24.1
25.725.625 25.525.9
23.823.423.723.323.2
20
10
0
Operating Ratio (%)
120
100
80
60
40
20
0
1950-51
1960-61
1970-71
1980-81
1990-91
2000-01
2008-09
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
78.75
84.13
96.07
91.97
98.34
81
90.46
94.59
94.85
90.19
93.6
91.3
90.5
96.5
98.4
97.3
Source: Indian Railways Yearbook
Key Findings:
Revenue: Railways earns revenue
primarily from passenger and freight
traffic. Indian Railway’s dependence
on freight traffic has increased, and
passenger traffic has decreased
over the years. In 1951, 41 percent of
the railways’ revenue came from the
passenger segment and 51 percent
from the freight segment. This share
has been steadily declining for the
passenger segment and increasing
for the freight segment. In FY19, freight
accounted for 71 percent of the total
revenues of the railways. Based on
discussions with the Niti Aayog, it was
also observed that in the case of the
freight, the revenue earnings are 40
percent more than the operational
expenses.

Line Capacity: The growth rate for line
capacity
18
in route km has been lower
than expected. In 1961, the growth rate
was 6 percent, which fell between 1 to 2
percent from 2001. Currently, the total
route km in the Indian Railways stands
at 67,415 km.


Rolling Stock: Rolling stock
19
in
Indian railways has not witnessed a
significant change compared to the
increase in freight demand. The total
number of wagons has declined by
29 percent from 1981 (400,496 units)
to 2019 (289,185 units). Further, there
has been no significant improvement 35
As-Is Assessment
in the number of units of locomotives
over the years. In 1980-81 locomotives
(steam, diesel and electric) stood at
10,908 units, while in FY19, it witnessed a
minimal increase to 12,147 units.
Wagon Utilisation: Optimal use of
the wagon design and enhancing the
wagons’ carrying capacity are essential
to increasing freight earnings. However,
the total carrying capacity of wagons
in Indian Railways has not significantly
improved in the last few years. The
average growth rate has been only 4
percent over the previous five years.
It increased from 14.3 million tonnes in
FY15 to 17 million tonnes in FY18.
Fare to freight ratio: The average
passenger fare to average freight tariff
in India is 0.3, one of the lowest among
the global majors. This ratio has declined
from 0.5 in 1951 and stagnated between
0.2 and 0.3 from the 1990s onwards.

The passenger segment’s traffic volume
is high because of low passenger

fares, but the revenues are
disproportionately low.
Train Speed: The addition of
passenger traffic has harmed the
speed of goods trains because of
the priority given to passenger trains.
Though the speed of goods trains
should be on an average 75 kmph, the
freight trains’ actual average speed
is only 22 kmph.
20
The average freight
train speed was 17.4 km/hr in 1951,
which increased to 25.9km/hr in 2013-
18 Line capacity means the number of trains that can be run on a section in 24 hours.
19 The term rolling stock in rail transport refers to any vehicle that moves on tracks. It includes coaches, wagons and train sets.
20 Mattoo, Ajita. Indian railways: Agenda for reform. Economic and Political Weekly. 2000.
21 Indian Railways’ Operating Ratio (%). The Economics Times. 2017. https://economictimes.indiatimes.com/economy-
dashboard/indian-railways-operating-ratio-/articleshow/56736893.cms?utm_source=contentofinterest&utm_
medium=text&utm_campaign=cppst
14 and started declining afterwards.
In 2018-19, the freight train speed was
23.2 km/hr.
Operating Ratio: Operating Ratio
indicates how efficiently railways can
earn with every rupee spent on the
development.
21
It is calculated as the ratio
of working expenses to gross earnings.
A lower operating ratio is regarded
as better and indicates the system’s
sound financial health. In FY19, Indian
Railway’s operating ratio was 97.3%,
which means that Railways is spending
97.3 paise to earn 100 paisa - indicating
minimal surplus. A high operating ratio
has created a vast investment gap for
capacity expansion.
Maintenance efficiency: The time
taken for the maintenance of rakes by
Indian Railways is much greater than
the ideal time. After a rake’s brake
power certificate validity reaches
the maximum limit (running time or
the number of days), they are sent
to the already congested yards,
thus increasing the maintenance
time. It eventually impacts the timely
supply of rakes and increases the
turn around time. The maintenance
of the equipment is very important
to the safe operation of the railway
line and requires huge investment on
facility maintenance bases and labour
cost. In Indian Railways, the process
of detecting defects in locomotives
and wagons is mostly based on 36IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
freight movement.
4.1.1 Freight Volume Forecast
Total freight volume for Indian Railways
is projected using the simple linear
regression technique
22
. It describes the
relationship between two variables
(dependent and independent) based
on the sample data and predicts the
dependent variable’s value based on
the value of the independent variable. A
conservative estimate of rail freight volume
for the years 2020 to 2030 is performed
using the sample freight volume data for
the years 2000 to 2019, using the least-
squares method. Based on estimates, the
rail freight volume will increase from 1.2
billion tonnes in 2019 to 1.7 billion tonnes
in 2030. In this analysis, the dependent
variable is rail freight volume (in million
tonnes), and the independent variable is
22 Simple linear regression only looks at the linear relationship between the dependent and independent variables; is
sensitive to outliers; and the results are based on only the x variable
manual inspection which is costly and
time consuming. There is a need to
automate the maintenance process
and follow a time-based or condition-
based predictive maintenance
approach. In addition to investing in
rolling stock, Indian Railways should
also focus on efficient management of
wagon maintenance, which will lead to
timely supply of rakes.
Indian Railways has its limitations to
move goods efficiently compared to
the countries with a well-developed
rail network. The national transporter
has always focused on bulk freight
transportation limiting the freight
basket to raw materials for industries
such as power, iron, and steel plants.
Transportation of non-bulk commodities
accounts for a small share in the rail
Indian Railways Freight Volume Forecast (million tonnes)
Source: Indian Railways Yearbook, estimated for 2020 to 2030
1,80012%
1,600
1,400
10%
1,2008%
1,000
800
6%
6004%
400
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
200
2%
0%–
Freight Volume (million tonnes) Growth in Freight volume (%) 37
the time-period (years). The regression
equation is as follows:
Yi=α+βXi
Where Yi is Rail Freight volume (in million
tonnes), Xi is the Time Period, α is the
intercept value and β is the slope of Xi.
Freight Volume and Price
The price charged for freight movement by railways is one of the most important
factors influencing the freight volume. The demand sensitivity to change in price can be
calculated using the principle of price elasticity of demand, which is a measure of the
change in the quantity demanded of a product in relation to the price change. Expressed
mathematically as:
Price Elasticity of Demand (ed) = % Change in Quantity Demanded / % Change in Price
elastic demand unitary elastic demand inelastic demand
|ed|>1|ed|=1|ed|<l
price risesincome falls no changeincome rises
price fallsincome rises no changeincome falls
An economic survey for 2014-15 reports that freight traffic in Indian railways is more
sensitive to price changes than passenger traffic. It showed that the freight traffic
sensitivity to price changes was 55.4 percent, while the same for passenger traffic was
14.4 percent. The price of railway traffic alone has a significant effect on its freight volume.
The railway freight volume decreases with a corresponding increase in freight price. In
addition, railway freight volume is impacted in the same orientation by the change in the
price of other competitive transport modes. Other macro variables such as the change in
GDP, industrial production, etc., also impact the freight volume.
Railway
freight
volume
Railway Price
Railway
freight
volume
The Relation Between Railway Freight
Volume and Railway Price
The Relation Between Railway Freight
Volume and Other Transport Mode’s Price
* Shi, Ying. Fang, Xiaoping. Chen, Zhiya. Price Analysis of Railway Freight Transport under Marketing Mechanism. Central
South University, China. ScienceDirect. 2012.
* Railway Price Traffic is more price sensitive. The Hindu. 2016.
As-Is Assessment 38IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
4.2 Comparative Cost
and Time Analysis:
Rail and Road
Railways are the primary carrier of
bulk commodities such as coal, iron
and steel, food grains, and fertilisers.
However, India is a consumption-driven
economy with a total size of USD 2.9
trillion in 2019, and consumable goods
occupy a significant logistics share. Rail
transportation being less flexible in India,
road capture the majority of the stake
in consumer goods’ supply chain. There
are various infrastructural, operational
and, connectivity constraints that have
further augmented this problem in
railways. Despite privatization in the
container segment of Indian Railways, the
domestic container movement has hardly
witnessed any growth. The domestic
container business has been hovering
around 2% of the total traffic carried by
rail. Due to limited services by rail for
the non-bulk cargo, the majority of the
domestic container freight share is taken
over by roadways. More shippers move
their cargo by road since it is cheaper.
The challenge for Indian Railways is to
reduce the cost as the way road transport
has been able to achieve.
The movement of non-bulk commodities
over rail requires a well-developed
intermodal container ecosystem,
including freight aggregators, intermodal
container terminals, suitable wagons,
scheduled rail services, and first and last-
mile connectivity options. However, a
lack of these rail services makes the road
more attractive in shipping costs and
services. Indian Railways charges a flat
haulage fee for containers irrespective of
the commodity moved, making rail non-
competitive to the road.
Cargo Movement Prices by Road
Route
Distance
(Kms)
Approximate
Price
INR per Kg
(upper limit)
Bombay to
Chennai
1,335 3 to 5
Bombay to
Assam
2,921 8
Bombay to
Delhi
1,416 3.5
Source: Direct Interactions with logistics stakeholders
The below analysis suggests that despite
comparative long-haul cost for rail
transportation and road, fixed costs like
the handling and last-mile increases the
overall cost and reduce the freight loading
potential for Indian Railways. The below
table provides a cost breakup of a 24-ton
container from Mumbai to Delhi via rail
and road. 39
As-Is Assessment
Mumbai to Delhi Container Movement Cost Comparison (in INR)
Category
Approximate Cost by
Rail (INR)
Approximate Cost by
Road (INR)
Long Haul Cost45,00045,000
First and the Last Mile
Handling Cost10,000
Connectivity Cost20,000
Total75,00045,000
Cost per Kg3.1251.875
Source: Direct Interactions with logistics stakeholders
High rail freight costs hamper container
freight movement. A fair price for
container movement is essential to
increase the domestic container freight
volume. Indian Railways needs to
push aggressive discount schemes to
compete with road transportation. Better
freight discounts are necessary to make
container movement by rail economical
for improving the container freight share.
Along major routes, Delhi-Bengaluru,
Delhi-Mundra, Delhi-Mumbai, and the
like, stakeholder discussions reveal
that it takes approximately 2-3 days
longer for transportation via rail than
the road. It is primarily due to increased
transit time by rail and pre-movement
and post-movement procedural
delays such as wagon placement,
loading and unloading operations,
multi-modal handing etc. Based on
dwell time study,* the transit time of
trains from JNPT to ICD Tughlakabad
(Delhi) was 60 hours and, the Mundra
port to ICD Tughlakabad was 84 hours
in December 2018. There is a need to
enhance the cargo efficiency in pre
and post-movement procedures and
improve the transit time of cargo trains.
In August 2020, Indian Railways launched
India’s first privately-operated and the
longest roll-on, roll-off (RO-RO) freight
service between Bengaluru and Solapur.
Around 7,000 trucks run daily between the
two points, and it takes approximately 38
hours to reach the final destination. With
the introduction of RoRo rakes, this time will
reduce to 17 hours. Each RO-RO rake can
transport ~42-45 trucks, which can get on
and off the rakes with quick turn-around
time. The service will help railways provide
end-to-end service and at the same time
save energy consumed by trucks and
also lower environmental pollution and
congestion on the roads.
Source: Karnataka CM flags off Bengaluru to Solapur RORO train. The Hindu. August 2020
*There are seasonal variations in container trains transit time. http://www.jnport.gov.in/dicdc_and_fieo_report 40IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Railways have taken few initiatives to
enhance the container movement, such
as discounted prices on special rakes for
closed-circuit trains and reduced freight
in RoRo trains that can be implemented
on other routes to increase domestic
container movement.
Special rakes for closed-circuit
movement - Indian Railways has
allowed a 50 percent discount on
container freight movement for the
closed-circuit movement of container
trains from JNPT to CFS in Mumbai,
barely 100 km distance between the
origin and destination. This route’s
cost per container is INR 2,500 (INR
0.1 per kg) by rail and INR 4,500 via
road (INR 0.18 per kg) for a 24-ton
container.
RO-RO trains Bombay to Goa - A
RO-RO train consists of 45 trucks
loaded with an approximate haulage
charge of INR 2 to 3 lakhs per
train. The rakes are unloaded and
reloaded with trucks from the Kolad
good shed to Verna (12 kms from
Madgaon) and cover a total distance
of 450 km.
Cargo Movement Prices for Different Categories
Train Category Route
Information from the
Stakeholders
Cost
Comparison
Parcel Wagon
Bombay
Rajdhani
INR 3 lakhs per box
(15-ton box)
INR 20 per Kg
RO-RO TrainBombay to Goa INR 2 lakh per train INR 0.33 per kg
Container Train Bombay to Delhi
INR 40.50 lakh per train (INR
45,000 per box and min 90
boxes in each train)
INR 1.875
per kg
Special Rakes for Closed
Circuit Movement-short
distance
JNPT to CFS
(Mumbai)
INR 2400 per container INR 0.10 per kg
Source: Direct interactions with logistics stakeholders 41
Utilization rate of Cargo Wagons in Passenger Train
Number of Passenger
Trains
Number of Cargo
Wagons in Passenger
Trains
Utilization (%) of Cargo
Wagons as per stakeholder
estimates
13,52327,046 ~20 percent
Source: Indian Railways Yearbook; Direct Interactions with logistics stakeholders
Container Train Operators (CTOs) can
lower costs through increased efficiencies
such as higher asset turnover and faster
turnaround time to become a reliable
mode for long-haul freight movement.
Companies will also function better
if a few strategic multimodal logistic
parks are located across the country.
Additionally, the Indian Railways can also
utilize the cargo wagons in the passenger
trains to their full potential. There are two
cargo wagons in each passenger train.
Currently, 80 percent of the cargo wagons
remain unutilized. By Uberizing (uber-like
model) one of the cargo wagons in each
passenger train, customers can book the
wagon using an online application. It can
be one way to directly increase the freight
traffic - without any additional investment
in infrastructure. Indian Railways may
keep operating one of the two cargo
trains traditionally.
As-Is Assessment
With the e-commerce platform picking
up at a significant pace, online retail
penetration in India is expected to
reach 10.7% by 2024 from 4.7% in 2019.
The COVID-19 pandemic has impacted
consumers’ buying habits and the choice
of market platform, the brick and mortar
retailers have sensed the urgency to
expand their digital presence. Growth in
India’s e-commerce is likely to come from
better penetration into FMCG, apparel,
appliances, health, and personal care,
improving the payment ecosystem, and
shopping ease. India is the second-
largest online market globally, with over
560 million internet users. The tech-
savvy millennials and the digital wave will
contribute to the growth of e-commerce.
Opportunities in the logistics chain for
quick movement of goods for e-tail
players will expand the railway’s product
basket and increase revenue. Railways
should focus on building an e-commerce
transportation system with special
trains that would enhance capacity
planning, track movement of goods,
improved infrastructure and freight
movement security via the rail network.
The improved transportation of parcels by
the Indian railways will ensure quick and
convenient movement for e-commerce
platforms. 42
IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Public Private Partnership in Railways
PPPs in railways can bring an influx
of investment, increase operational
efficiency and bring in modern and
clean technology. The prime focus of
PPP models in Indian Railways should
be to provide greater customer
satisfaction, enhance digitization and
improve efficiency. Based on extensive
stakeholders’ discussion, a PPP model
is suggested for a few dedicated
container freight trains from point to
point (between two metros or industrial
hubs to warehousing hubs) could
be adopted by Indian Railways. This
model could be based on the Build-
Own-Operate approach, wherein the
Indian Railways will be responsible
for providing the infrastructure, and
the private sector be responsible for
operations and management. The
model is detailed below:
Railways to provide ten dedicated
container freight trains on major routes
with a distance of at least 1,000 kms
(should be studied and selected based
on data) for which the cargo is operated
and managed by the private sector.
The railway haulage payable to Indian
Railways for 90 boxes (24 tons-cargo in
each box) could be INR 0.70 per kg per
1,000 kms. The freight forwarders would
have to provide a minimum guaranteed
cargo load of at least one container.
Using this model, if the Railways operates
ten trains a month for five years and, for
a distance of 1,000 kms with a two-way
traffic - the revenue for Indian Railways
would be as follows:
10 trains X 0.70/kg X 24,000kg X 90
container X 60months X 2-way = INR
181.44 crores
According to stakeholder estimates, this
model will timely cover the indicative
cost of replacement (mentioned below)
and would also provide a reasonable
margin for the Indian Railways.
• Locomotive - INR 12.5 cores
• Wagons - INR 15 crores
• Containers - INR 2.5 crores
• Rail tracks - INR 50 cores
• Rail siding - INR 30 crores and;
• Power cost of 0.02% of freight
In the proposed model, railways create/
provide the infrastructure for ten trains
and open rail siding at both the ends.
The operation and management of
equipment and labour, and the transport
facility for first and last-mile connectivity
will be handled by the private players.
The revenue generated through this
approach can be shared by adopting
a revenue sharing or a royalty based
approach. In the revenue sharing model,
the concessionaire (private player) may
commit a certain agreed share with the
railways, with a condition of minimum
guaranteed revenue to the railways.
On the other hand, in the royalty based
approach, the private operators will pay
royalty per tonne or per container of Source: Direct Interactions with logistics stakeholders
*Source: Keys to attracting Private Capital for Railway Development. World Bank Group. 2015
43
As-Is Assessment
cargo to the Indian Railways. Both these
models are used in the maritime based
PPP projects. The model concession
agreement could be decided in such a
way that revenue-sharing or the royalty
shared by the private players with the
Indian Railways could be re-calibrated
vis-à-vis traffic flow.
Once the success of the proposed
model is established, similar approach
can be replicated in commodity
specific wagons and other privatisation
areas such as warehouses, terminals
and end-to-end connectivity. Further,
private players can also be encouraged
to invest in additional rail infrastructure.
In several countries, private business
rents some specific physical assets,
such as rolling stock, which saves the
railway from financing those assets
itself. For example, in 2003, Russia
began allowing the private sector to
rent freight wagons to the railway,
making it profitable through a change
in tariff rules. The new policy created
a vibrant market where the private
sector provided USD 50 billion toward
replacing the railway's extensive
stock of old wagons. Around 85 percent
of freight wagons in Russia are now
privately owned. Besides, the private
sector can sell services to the railway,
such as track maintenance. In that case,
the investor deploys its equipment and
facilities, finances the working capital
involved, and provides the labour. 44IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
4.3 International benchmarking and best practices
rail freight cost (tonne/km) is three times
lower than India’s.
24
The increasing dependence on roads for
freight transportation has resulted in a
low freight share by railways in India as
compared to developed countries like
the USA (45%), Canada (61%), and Russia
(91%). The fare-freight ratio (the ratio of
the average passenger fare to average
freight rates) for the Indian Railways is
0.3, South Korea (1.4), France (1.3), China
(1.2), Malaysia, and Indonesia (0.9), and
Thailand (0.7). In India, the railway fares
have stagnated for years, and fare prices
have lagged behind the inflation level.
Countries like Canada have seen a shift in
the road to rail goods movement due to
the structural changes accompanied by
the rising cost of fuel and strict restriction
on driving hours, leading to increased
road transport prices. They have also
simultaneously invested in improving
railroads for efficiently transporting goods
over long distances.
25
23 Rail Freight Transport Market- Growth, Trends, And Forecast (2020 - 2025). Mordor Intelligence.https://www.
mordorintelligence.com/industry-reports/rail-freight-transport-market
24 Mukundan, Harish. A Comparative Study of Maritime Operations in India. MIT. 2007. http://web.mit.edu/harishm/www/
papers/13bsmthesis.pdf
25 Berg, Claudia and others. Transport policies and development. Taylor & Francis. 2016. https://www.tandfonline.com/doi/full/10.1080/
00220388.2016.1199857; https://www.fool.ca/2014/09/02/why-billionaire-bill-gates-owns-canadian-national-railway-company/
The trade flows across the world are
increasing with a rise in global trade and
trade agreements, and the international
rail freight transport market is expected
to grow at a CAGR of 2 percent for the
period 2020-2025. However, the rail
industry across countries is facing
severe competition from roadways.
23
The
railway systems are heavily investing
in infrastructure to reduce costs for
customers and to increase rail freight.
For example, China is efficiently using the
advanced rail infrastructure for speedy
and low-cost movement of goods. It uses
special trains for carrying containers
that connect significant ports to the
inland. In addition, China has dedicated
railway lines to move container traffic
and planned double-decker container
carriages for greater efficiency. Also, the
rolling stock maintenance standards are
higher and the equipment failure rate is
lower which eventually leads to a faster
wagon turn-around time and increased
wagon utilisation rate. As a result, China’s 45
As-Is Assessment
4.3.1 Logistics Performance Index
country’s logistics performance based
on several parameters such as the
efficiency of the customs clearance
process, quality of trade- and transport-
related infrastructure, ease of arranging
competitively priced international
Share of Freight by Rail of Total Inland Freight
India USA Russia Canada
100%
80%
60%
40%
20%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: OECD Database
Source: NTDPC India Transport Report 2014
Ratio of Average Passenger Fare to Average Freight Rates (NTKM)
1.6
1.4
1.2
1
0.8
0.6
Korea
France
China
Austria
Malaysia
Indinesia
Thailand
Greece
Vietnam
Pakistan
India
Bangladesh
Srilanka
Philippines
0.4
0.2
0
1.4
1.3
1.2
0.90.9
0.7
0.4
0.30.30.3
0.2
0.10.1
1.1
The logistic Performance Index is a
benchmark for logistics competence and
skills of a country, the quality of trade-
related infrastructure, and the price of
international shipment. The Logistics
Performance Index score reflects a 46IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
4.3.2 Logistics Cost as a Share of GDP
electrical goods, hardware, furniture etc.
26
The
Indian Railways are running at an inefficient
operating ratio of 97.3 percent compared to
61 percent of USA and 63 percent of Canada.
Based on studies, an operating ratio of above
85 percent is an indicator of poor financial
health of a country’s railways as they are less
likely to cover the total costs with increased
dependence on outside support.
27

Source – The World Bank
Logistics Performance Index Score
5
4
3
2
1
0
4.2
Germany
4.03
Japan
3.89
United States
3.73
Canada
3.61
China
3.18
India
LPI Score
India’s logistics cost as a share of GDP is
14 percent, which is high according to the
global standards - the USA (10 percent),
Germany (9 percent), Japan (11 percent).
High dependence on roads has increased
the cost of logistics adding to the overall
industrial cost. Road freight in India
dominates movement of high-value items
such as automobiles, pharmaceuticals,
26 India’s logistic costs higher than BRIC nations. The Times of India. 2017. https://timesofindia.indiatimes.com/business/
india-business/Indias-logistic-costs-higher-than-BRIC-nations/articleshow/14151707.cms
27 Efficiency in Railway Operations and Infrastructure Management. International Transport Forum. OECD. 2019 https://www.
itf-oecd.org/sites/default/files/docs/efficiency-railway-operations-infrastructure_1.pdf
Operating Ratio Comparison (Percent), 2019
120
100
80
61
USCanadaIndia
63
97
60
40
20
0
Source: Statista. Operating Ratio for US is Union Pacific Railroad and Canada - Canadian National Railways
shipments, quality of logistics services,
ability to track and trace consignments,
and frequency of shipments to reach the
consignee within the scheduled time. The
index ranges from 1 to 5, with a higher score
representing better performance. In 2018,
India’s logistics performance index score
stood at 3.18, which is lower than global
majors such as Germany (4.2), Japan
(4.03), and the USA (3.89). 47
As-Is Assessment
Global Practices:
In the USA, the importance of rail freight
traffic rapidly declined after the Second
World War. From 1950 to 1980, the market
share of rail freight dropped from 56 percent
to 37 percent. The economic condition of
freight rail deteriorated so much that it
was close to collapse by the 1970s. Severe
competition from road transport operators
contributed further to this situation.
In the absence of sufficient revenues,
railways were not able to maintain their
networks appropriately. However, the US
federal government and the rail industry
recognized that the leading cause for
rail freight’s weak state was the strict
regulatory framework and the authorities’
price regulation. While the purpose of the
regulations was to protect shippers from
high or discriminatory freight rates, it
constrained railways in supplying efficient
services, muted innovation, and lowered
income to invest in advanced equipment
and infrastructure. Due to increased
flexibility and economic freedom, railways
could design services based on customer
needs, quote market-based freight rates,
and deal with the infrastructure as required.
Following steps were taken to improve rail
share in the US.
28
1. Deregulation of rail freight traffic and
free-market conditions for the freight
segment was considered the key to
improving competitiveness. It allowed
railways to charge freight service rates
based on market needs with minimal
intervention from the regulatory bodies.
2. Introduced dedicated intermodal
services in partnership with logistics
service providers such as parcels and
motor carriers.
3. Technological innovations such as
double-stack wagons, shuttle trains, IT-
based central reservation systems, RFID,
and OCR identification technologies at
the terminal.
4. Huge investments in rail and intermodal
traffic to expand the network from
single to double or triple track line,
raising clearance for double-stack
trains, advanced signalling systems
for capacity increase, investment in
terminals, wagons, and locomotives.
5. The US Class I railways voluntarily report
performance data on the Association
of American Railroads (AAR) website.
The AAR performance statistics acted
as a marketing and benchmarking tool
for the railways, and constitute as an
information source for the customers.
Based on a standardized methodology,
they provide statistics for three features::
Wagons on line - the average daily
number of wagons on the network
Terminal dwell - the average time
a wagon spends at a specified
terminal location
Train speed - average velocity
achieved for line-haul movement
excluding terminal time
28 Benchmarking Intermodal Rail Transport in the United States and the Europe. International Union of Railways. UIC. 2019.
https://uic.org/diomis/IMG/pdf/DIOMIS_Benchmarking_Intermodal_Rail_Transport_in_the_US_and_Europe.pdf 48IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
6. A radical transformation of timetables
by introducing timetables matching
customer requests.
As a result, the total volume measured
in revenue ton-miles doubled, and the
market share of rail reached 41 percent.
The freight railways enhanced their
productivity by more than 160 percent. In
addition to the above reforms, this result
could be attained through numerous
mergers, especially among the Class I
railways, the more efficient employment
of equipment, staff, and facilities, and
the sale or abandonment of poorly used
lines. In the US, deregulation of the freight
segment completely changed the ability
to work directly with shippers.
International benchmarking is done based
on data available from secondary sources.
For a more comprehensive understanding,
it is suggested to make on-the-ground
visits to meet international stakeholders
and learn global practices from a policy-
making and implementation lens.
4.4 Turning Crisis into
an opportunity:
Initiatives Taken
by Indian Railways
during Covid-19
At the onset of the COVID-19 pandemic,
the passenger trains were suspended
from March 24, 2020, till July 2020.
However, goods and services continued
to be transported through trains carrying
essential commodities to various parts
of the country. During this period, special
railway parcel vans were made available
for quick mass transportation for the
state governments and the e-commerce
entities. The provision of parcel trains
by Indian Railways was initiated to
increase the rapid transit of goods and
bolster supply chains’ efficiency to help
in the movement of small quantities and
essential items such as dairy products,
medical equipment, medicines, groceries,
edible oil, etc.
Despite the unprecedented challenges
because of the COVID-19 pandemic, the
Indian Railways took several initiatives to
boost the freight operations. Resulting which
the freight loading in August 2020 was
4.3 percent higher than the same period
last year. Till August 2020, the total freight
loading was 81.33 million tonnes higher than
the same period the previous year.
29
Further,
in September 2020, the rail freight increased
by 14 percent. The freight revenue stood at
INR 9,896 crores in September 2020, whereas
in September 2019, the same was INR 8,716
crores.
30
The demand remained low for
many industries, and manufacturing output
weak post the lockdown period. Due to lower
demand, the movement of goods declined
across the country; however, the share of rail
freight increased significantly.
29 Indian Railways takes Series of Initiatives in Traffic and Non-Traffic field to Boost Freight Operations. 2020. IBEF. https://www.
ibef.org/news/indian-railways-takes-series-of-initiatives-in-tariff-and-nontariff-field-to-boost-freight-operations
30 Freight loading by Indian railways go up by 15% in September. Opindia. 2020 https://www.opindia.com/2020/10/freight-
loading-indian-railways-trains-increase-september-100-million-tonnes-speed-double/ 49
As-Is Assessment
"Almost all commodities have shown
positive growth in September and that
gives a good indication of the real revival
of the Indian economy…It indicates that
Indian economy is recovering and the
economic activities are improving. Despite
COVID-19 challenges, Indian Railways
has taken many initiatives for business
development and a lot of initiatives were
taken to boost freight loading and the
result has come in September" CEO &
Chairman, VK Yadav, Railway Board.
31
Utilizing the COVID period as an opportunity,
the Indian Railways substantially increased
the speed of freight trains. Compared
to the previous year, approximately 72
percent increase has been observed in
freight trains’ average speed during 2020-
21. Some of the measures
32
taken to boost
rail freight movement include:
Specially designed Parcel vans to
ensure an uninterrupted flow of
essential commodities
5 percent discount on loaded
containers (addition to 25 percent on
empty containers) from March 2020
onwards
Two-point unloading permitted for
Automobile traffic for the Automobile
sector from August 2020
Limit on the number of co-users in
private siding removed for all sectors
from August 2020
Round trip traffic (RTT) policy –
charging of lower class for all sector –
long lead concession – 15 to 20 percent
for coal, iron ore and steel and short
lead concession -10 to 15 percent for
all sector (except for coal and iron ore)
from July 2020.
The distance restriction on mini rakes
of 1500 KM removed with a small
surcharge for foodgrains and other
sectors.
A Freight Business Development Portal
was launched as a one-stop solution
to ensure ease of doing business with
Railways. The focus will be to deliver
the best services to the customers.
To foster the freight operation of Indian
Railways, special trains such as Kisan
Special Parcel Trains have been introduced.
These trains are for the transportation of
perishable items at affordable prices. The
initiative has been taken by the Indian
Railways with the involvement of the private
sector. The focus is to provide a seamless
supply chain for perishable goods and
ensuring benefits for both farmers and
consumers. Some of the identified special
trains, routes, and seasons include
33
:
31 Freight loading by Indian railways go up by 15% in September. Opindia. 2020 https://www.opindia.com/2020/10/freight-
loading-indian-railways-trains-increase-september-100-million-tonnes-speed-double/
32 Indian railways takes several initiatives in tariff, non-tariff field to boost freight operations amid COVID-19 challenges. 2020.
Zee News. https://zeenews.india.com/economy/indian-railways-takes-several-initiatives-in-tariff-non-tariff-field-to-
boost-freight-operations-amid-covid-19-challenges-2306001.html
33 Mango Special to Banana Special: Kisan Rail gets on track. The Indian Express. 2020. https://indianexpress.com/article/india/
kisan-rail-farmers-indian-railways-6674609/ 50IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
In India, the Courier, Express, and Parcel
(CEP) market is estimated to grow at a
CAGR of more than 10.5 percent, mainly
due to the growth in the e-commerce
segment, increased internet penetration,
and improved technological innovations.
In 2018, India’s parcel volume witnessed
a 21 percent increase and reached 2.5
billion, while global parcel volumes
reached 87 billion in 2018, up from
74 billion in 2017.
34
With the growth in
e-commerce, India’s market for parcel
shipment is growing at a significant
rate. Assurance of timely delivery and
low volume consignments are critical
characteristics of parcel shipments.
There is an enormous opportunity for
Indian Railways to tap into this segment
and consolidate with the private sector.
Special TrainRouteSeason
Onion and Banana
Special
Nashik and Jalgaon to Delhi
between March
and December
Mango SpecialAndhra Pradesh to Delhi
between April to
June
Banana Special
Anantpur to Jawaharlal Nehru Port Trust in
Mumbai
Sapota (chiku)
Special
Surat, Valsad and Navsari in Gujarat to Delhi
between April
and November
Protein Special for
packaged meat
Dadri or Kanpur areas in UP to ports in Gujarat
and Mumbai

For smaller volumes and shorter
distances, road transport has been a
preferred mode. However, the special
parcel trains were introduced by
Indian Railways for smaller volumes
on time-tabled and customer-specific
routes during the crisis. Railways have
been successfully aggregating and
transporting goods in scheduled parcel
trains. With an increased focus on parcel
business growth, essentially for the
small traders, and a medium to long-
term strategy, the railways can attract a
significant parcel traffic volume. Indian
Railways can strengthen the supply
chain through joint participation with
e-commerce and 3PL players. The parcel
business can enhance freight business
and attract time-sensitive cargo to rail
34 India Courier, Express, and Parcel (CEP) Market Growth, Trends, Covid-19 Impact and Forecasts (2021-26) https://www.
mordorintelligence.com/industry-reports/india-courier-express-and-parcel-cep-market 51
– for example, fast-moving consumer
goods (FMCG), pharmaceutical, fruit and
vegetables, machine parts, etc.
Currently, Indian Railways has a negligible
share in the shipment of FMCG goods.
However, there is an immense opportunity
for the railways in this segment
as it is the fourth largest in the Indian
economy. With a value of USD 49 billion
in FY17, it comprises three sectors – Food
and Beverages (F&B), Household and
Personal care, and Healthcare. Household
and personal care constitute 50 percent
of the total FMCG sales in India.
35
The
logistics of the FMCG sector is highly time
and price sensitive. With the increased
flow of parcel trains, the sector players
can rely on railways for timely delivery
of products.
35 Sector overview. The Federation of Indian Chambers of Commerce & Industry (FICCI). https://www.ficci.in/sector-details.
asp?sectorid=73
As-Is Assessment IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
52
Rail freight from the Automobile sector
witnessed a jump during Covid-19
During the COVID-19 pandemic, auto traffic movement by rail has witnessed
a significant increase compared to last year. The rail share has increased
by 3% from pre-COVID to COVID times. Around 243 rakes were loaded in
August (2020) against 127 last year. Similarly, in up to 9
th
September 2020,
79 rakes were loaded as compared to 33 during September last year.*
The factors responsible for the shift from roads to railways for transportation
of auto vehicles are, 1) limited availability of truck drivers during the
lockdown, 2) frequent hurdles in inter-state movement amid lockdown,
3) substantial dip in transit time and availability of monetary incentives.
During the lockdown period (April, May and June) better monitoring of
rakes could be possible, ensuring better availability of rakes for loading.
As a result, the transit time reduced by 40-50% allowing to meet the basic
requirement of delivery within a stipulated time. The average speed of the
freight trains has increased from 23 Kmph to 46 Kmph again reducing the
congestion drastically leading to timely availability of supply at required
locations.
Hyundai Motors India Ltd. is the second-largest carmaker by volume in the
country. Currently, around 10% of total production volume are dispatched
through the railways. Given the current increase in rail share of auto vehicle
transport and higher available capacity in rail rakes and fluctuations in
manpower availability in road networks, there are higher chances that the
dynamics may vary, even then Hyundai Motors India Ltd. expects to have
minimum 10% proportion through rail in future.
*Why Automakers are choosing rail over roads to transport vehicles. LiveMint. 2020 Product Matrix and
Sector-Specific Case
Studies
CHAPTER 5 54IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
5.1 The Product Matrix
Railway transports a wide range of goods
and industrial outputs such as coal, cement,
iron ore, steel, petroleum, and agricultural
products such as foodgrains and fertilizers.
Railways are amenable for bulk movement
of raw materials from producing centres
to factories, and finished/semi-finished
products from factories to consumption
areas or ports for exports. In 2018-19, coal
constituted 50 percent of the total freight
movement of 1,221 million tonnes, followed
by Iron Ore (11%), Cement (10%), Mineral
Oil (4%), Fertilizers (4%), Iron & Steel (4%),
Foodgrains (3%), Limestone and Dolomite
(2%), Stones (including gypsum) other
than marble (2%) and other commodities
(9%). Transportation of coal and cement
accounts for more than 50 percent
of the total freight movement of the
Indian Railways.
Movement of Bulk Commodities by Indian Railways (Million Tonnes)
Coal
Iron & Steel
Cement
Foodgrains
Iron ore
POL (Mineral oils)
Fertilizers (Chemical manures)
Stones (including gypsum) other than marble
Sugar
Limestone and Dolomite
Salt
Other Commodities
1500.0
1000.0
500.0
0.0
969
2011-12 2012-13
1008
2013-14
1052
2014-15
1095
2015-16
1102
2016-17
1106
2017-18
1160
2018-19
1221
Source: Indian Railways Yearbook
Source: Indian Railways Yearbook
Movement of Bulk Commodities by Indian Railways from 2011-12 to 2018-19 (%Share)
Coal
Iron & Steel
Cement
Foodgrains
Iron ore
POL (Mineral oils)
Fertilizers (Chemical manures)
Stones (including gypsum) other than marble
Sugar
Limestone and Dolomite
Salt
Commodities Other than above
2018-19
2017-18
2016-17
2015-16
2014-15
2013-14
2012-13
2011-12
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
50%3%
4%
11% 10% 4%4%2% 9%
9%
9%
9%
9%
9%
9%
9%
2%
2%
2%
2%
2%
2%
2%
4%
4%
4%
4%
5%
5%
5%
4%
4%
4%
4%
4%
4%
4%
10%
10%
10%
10%
9%
11%
11% 11%
11%11%
10%
12%
12%
12%
4%
4%
5%
4%
4%
4%
4%
4%
4%
5%
5%
5%
5%
5%
48%
48%
50%
50%
48%
49%
47% 55
For bulk commodities, such as coal,
fertilizers and iron-ore, the majority of the
share of the total production and imports
is transported by the Indian Railways. For
example, in 2018-19, more than 50 percent
of the total Fertilizers, Coal and Iron ore
is transported via rail. Cement share
accounted for 35 percent, while Mineral
Oil (Pol) transportation by railways was
15% of its total production and imports.
Foodgrains and POI products have the
least share in rail transportation. With
freight traffic being sensitive to price hikes,
railways have steadily lost market share to
roads in various commodities like cement,
foodgrains, and POI.
36
While cement and
fertilisers have moved to roads, petro
products have moved to pipeline. Indian
Railways has managed to contain the
market share only for commodities which
are comparatively challenging to shift to
other modes.
Indian Railway’s total revenue is
witnessing a decline as the national
transporter’s revenue has decreased by
20 percent from FY17 to FY19. The below
figure shows the commodity-wise freight
earning of Indian Railways from FY17
to FY19. Coal has the maximum share
in railways revenue, accounting for 46
percent of the total. The other significant
commodities include Foodgrains (6%),
Iron and steel (7%), Iron ore (8%), and
Cement (8%).
Coal
Iron Ore Cement Foodgrains Fertilizers POI Products
100
80
60
40
20
0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
171717151515
141516
18
2221
4340
373737
35
636363
65
66
69
81
8685
80
716967
86858788
Source: Indian Railways Yearbook
Rail Coefficient for Major Commodities Carried by the Indian Railways as a Percentage
of Total Production Plus Imports
36 Indian Railways Re-birth of the Colossus. Edelweiss. 2017
Product Matrix and Sector Specific Case Studies 56IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Indian Railways has focussed on bulk
freight transportation, and the freight
basket is limited to raw materials for
industries such as power, iron, and
steel plants. The share of non-bulk
commodities in rail freight is around 30
percent of the total which is lower than
expected. However, railways have been
trying to include more commodities
in the freight basket, such as fly ash,
steel coils, containers, automobiles,
and FMCG.
37
Consistent efforts are
required to increase the share of non-
bulk commodities that can be attained
through various initiatives, such as
introducing commodity specific wagons’
design and development.
Commodity wise analysis
Coal
Coal reserves in India are majorly
concentrated in the country’s eastern
parts; however, it is supplied across the
nation. Due to the skewed production
and bulk transportation requirement,
the railway is a preferred mode for coal
movement. Coal and railways in India are
heavily interdependent. In FY19, 605 million
tonnes of coal was transported through
railways. Coal accounts for 50 percent
of the total freight and has a 46 percent
share in railways revenue. Coal is mainly
transported to thermal powerhouses, steel
plants, washeries, and other public users. In
FY19, 43 percent of the coal was supplied
to thermal powerhouses, 10 percent to
steel plants, and 48 percent to other
public users.
Percentage Share of Commodity wise Freight Earnings by Indian Railways
Total Revenue (in INR Crores): 2018-19 ->122,580 |
2017-18 -> 113,524 |
2016-17-> 102,028
2018-19
2017-18
2016-17
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
CoalIron & Steel
CementFertilizers
(Chemical manures )
FoodgrainsIron ore
POL (Mineral oils)Limestone and Dolomite
SaltOtherStones (including gypsum) Sugar
46%6%
7%
7%
7%
8% 8% 8% 6%
8% 8% 5%
8% 8% 5% 5%2%
2%
2%
10%
9%
9%
5%
5%
7%
46%
44%
Source: Indian Railways Yearbook
37 Indian Railways Sees ‘Alarming’ Shortfall in Expected Freight Traffic Revenue. The Wire. 2019. https://thewire.in/
government/indian-railways-freight-revenue-shortfall 57
Cement
In the cement industry, transportation
is required for the final product cement,
intermediate product clinker, and raw
materials such as coal, gypsum, fly ash, and
slag. Freight and logistics costs account
for 20-25% of the total cost for cement
companies.
38
The cement rail coefficient
declined from 43 percent in 2013-14 to
35 percent in 2018-19 mainly because
of higher rail freight and an increase in
cement’s intra-regional movement. Indian
Railways have taken many initiatives
to improve the share of cement freight.
Many schemes and policies have been
introduced, such as the LTTC (Long Term
Tariff Contract), high capacity wagons,
etc. However, the industry is constrained
by several challenges that restrict cement
companies to use rail extensively for their
transportation needs.
Source: Indian Railways Yearbook
Source: Indian Railways Yearbook
Coal : Tonnes Carried by Indian Railways for different Segments, 2018-19
60%
43%
48%
10%
0%
50%
40%
30%
20%
10%
0%
Thermal power houses Other public users Steel PlantsWasheries
Percent
50
43
40
373737
35
40
30
20
10
0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Percentage of Cement Carried by Indian Railways of Total Production and Imports
38 A long haul for railways to win back cement freight. LiveMint. 2017. https://www.livemint.com/Money/
VLSashnKfvMR7pMlaEd9RM/A-long-haul-for-railways-to-win-back-cement-freight.html
Product Matrix and Sector Specific Case Studies 58IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Automobile
India’s automobile industry is the fourth
largest globally, with domestic production
of 26.3 million and sales of 21.5 million
vehicles in FY20. Two-wheelers and
passenger vehicles account for the highest
share of domestic output and sales. The
Auto freight movement involves long-
distance movements (>1000km) from
the plant to the dealers’ location. Indian
Railway’s share is currently less than 5
percent of the total automobile movement
across the country. The rail coefficient in
auto traffic is 70% in the US, 35% in Europe,
while it is only 3.1% in India. As the industry
is expected to grow in the coming year,
there is immense scope to capture the
automobile traffic via rail. Various studies
have indicated that Indian Railways can
increase its share of auto traffic to 20%
with proper reforms and infrastructural
changes.
39
Indian Railways initiated several
measures to capture automobile traffic.
One of the key initiatives is the launch of
the AFTO policy in 2010.
Foodgrains
India is the second-largest producer
of foodgrains globally. Of the total
foodgrains production, around 40-50%
of the total market surplus of rice and
wheat is procured by the Government,
dominating as a buyer in the market. For
a few states, such as Punjab and Haryana,
80-90% of the produce is purchased by the
government. Such large procurements
have made the government largest buyer
39 Indian Railways Re-birth of the Colossus, Edelweiss. 2017. https://www.edelresearch.com/showreportpdf-35319/
RAILWAYS_-_SECTOR_REPORT-JAN-17-EDEL
Share of Passenger Vehicles Carried by Indian Railways of the Total Passenger
Vehicle Production
Source: Increasing Rail Share in Freight Transport in India, The Energy and Resources Institute
1,60,0004.0%
1,40,0003.5%
1,20,0003.0%
1,00,0002.5%
80,0002.0%
60,0001.5%
40,0001.0%
20,0000.5%
00.0%
2013-14 2014-15 2015-16 2016-17 2017-18
1.2%
1.7%
2.9%
3.3%
3.7%
Number of Passenger vehicles carried by Indian Railways% Share 59
of rice and wheat in the domestic market.
As per Indian Railways Yearbook, the
revenue generated for railways through
foodgrains during (2018-19) is INR 7,615.98
crore, whereas the same for 2017-18 year
was INR 8,402.81 crores resulting in 9.4%
decrease of revenue. The share of Indian
railways freight movement for foodgrains
has been witnessing a decline in the
past few years. To increase the share
of foodgrain transportation, various
initiatives such as traffic rationalisation,
new policy guidelines for stations to
stations rates have been taken by
the Railways.
Containers
India has been witnessing high growth
in non-bulk traffic movement. There is a
significant demand for transportation of
the non-bulk goods as the production
centres are usually at farther distance
from the consumption centres. Because
of the convenience of moving the non-
bulk commodities in containers, the
containerized traffic has increased
significantly in the last decade. The
growth in container traffic handling at
the Indian Gateway ports has grown
from 7.58 million TEUs in 2008 to 14.6
million TEUs in 2018.
40
With rising trade,
the growth in domestic container traffic
is also immense.
In 2006, Indian railways allowed private
container operators to enter the rail-
based container traffic movement. It was
the first significant step by the national
transporter to allow private freight
operators in the railway operations to
increase the rail share of containerized and
non-bulk traffic. However, an increase in
container traffic was witnessed only in the
initial years, which stagnated afterward.
41

Transportation of non-bulk commodities
such as FMCG, pharmaceuticals, parcels,
and fruits and vegetables requires a
well-established rail infrastructure. There
are currently 18 private container train
operator (CTO) and CONCOR operating
the container service in India.
42
Container
Corporation of India (CONCOR) is a
government subsidiary under the Ministry
of Railways. Other significant players
in this sector are Gateway rail freight,
Pristine logistics, and Adani Logistics.
The share of container transport in India
is mainly towards roads due to various
challenges faced in movement by
railways such as high transportation cost,
lack of adequate intermodal facilities,
wagon and container lessors, timetables
rail services, and last-mile connectivity.
As a result, India’s container traffic is only
4 percent of the total rail freight volume.
This share has been stagnant over the last
few years ranging between 4-5 percent.
40 Container Corporation of India Ltd. https://www.concorindia.com/futureplan.asp
41 Container Corporation of India Ltd: Domestic facilities & service. https://concorindia.co.in/ddivision.asp
42 Ministry of railways has decided to give 25 % discount in haulage rate on transport of empty containers and empty flat
wagons. Press Information Bureau. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1555966
Product Matrix and Sector Specific Case Studies 60IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
The majority of the container movement
by Indian Railways is formed by the
export-import (EXIM) sector, while the
transportation in the domestic segment
is dominated by the roadways. EXIM
containers account for 4%, and domestic
containers for only 1% of the total railway
traffic. Domestic traffic is much lower
than the global majors such as the US
where the share of domestic containers
is around 10 percent. Within the total
container segment, in 2018-19, EXIM
sector contributed 80 percent, and
domestic sector constituted only 20
percent of the total container traffic of the
Indian Railways.
Indian Railways has taken many initiatives
to increase container traffic volume. Some
of them include a discount at 25% on actual
haulage rate per Twenty Feet Equivalent Unit
(TEU) on the transport of empty containers
Containers Carried by Indian Railways (Million Tonnes)
60
4%
4%
4%4%
5%
5%
6%
5%
4%
3%
2%
1%
0%
50
40
30
20
10
0
2013-14
Domestic Containers
EXIM Containers Share Total Containers Share
EXIM ContainersDomestic Containers Share
2014-15 2015-16 2016-17 2017-18 2018-19
1111
9101112
48
42
3737
38
33
Source: Indian Railways Yearbook
Source: Indian Railways Yearbook
Share of Domestic and EXIM Containers in Total Containers Carried by Indian Railways
Domestic Containers
EXIM Containers
100%
50%
0%
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
75%
25%22%22%21%20%20%
78%
78% 79%
80%
80%
and empty flat container wagons to facilitate
the movement of containers by rail towards
ports, thereby leading to higher loading by
rail from ports.
43
The double-stack dwarf
containers introduced by Indian Railways
43 Ministry of railways has decided to give 25 % discount in haulage rate on transport of empty containers and empty flat
wagons. Press Information Bureau. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1555966 61
are smaller in size and can allow better
capacity utilization on the electrified routes.
A dwarf container is 6 feet 4 inches in height,
capable of holding a capacity of 30,500 kgs,
and would enable double-stack movement
of cargo. The use of dwarf containers will
lower logistics costs and will make railways
competitive to the road. The Indian Railways
has also announced a five percent freight
rate discount for all container train operators
to attract more rail mode containers. The
discounts started from August 4, 2020, will
be valid till April 30, 2021.
However, there are many challenges faced
by private train container operators, which
have caused low domestic container
movement in India. Some of the challenges
include, lack of appropriate infrastructure
– as the majority of the domestic container
terminals have small-scale operations, which
makes the terminal services expensive for
the consignors. Lack of assured transit time
has been hampering container movement
in India, particularly in the tier two sectors.
Suboptimal service by Indian Railways to the
CTOs, as Indian Railways doesn’t guarantee a
timely supply of locomotive power, resulting
in delays in container trains’ movement. As
the preference for locomotive power supply
is given to the CONCOR trains, for others, the
containers remain stuck at Container Freight
Stations or Inland Container Depot (ICDs).
Thus, making it difficult for the private CTOs to
consolidate the wagon load quantities and
deliver the goods on time. This problem has
two sides – firstly, CTOs other than CONCOR,
struggle to attract traffic in the absence
of assurance of timely delivery of goods.
Secondly, the Indian Railway’s ecosystem
doesn’t allow private CTOs to increase
business. Due to these issues, the positive
impact of privatisation in the container
segment is not visible in the national
transporter’s efficiency. Other factors include
- lack of end-to-end modal services and high
haulage charges for container trains. Lack of
availability of 40 feet trailer to conduct last-
mile operations. Considerable investments
in wagons and containers by the container
operators in the absence of a widespread
wagon leasing system.
5.2 Case Study:
Automobile
The automobile sector of India holds
significant importance in the economic
growth of the country. The industry
contributes around 7 percent to the GDP of
India. Between FY16 to FY20, the domestic
automobile production increased at a
growth rate of 2.36 percent, with 21.5 million
vehicles manufactured in FY20.
44
The sector is
dominated by two-wheelers and passenger
vehicles, accounting for 81 percent and 13
percent of the total vehicle sales—followed
by commercial vehicles and three-wheelers,
constituting 3 percent each in the domestic
market share. In FY20, automobile sales
declined by 22 percent compared to FY19.
However, in recent months a significant
increase has been witnessed in automobile
sales by some primary industry players.
Product Matrix and Sector Specific Case Studies
44 Indian Automobile Industry Report. IBEF. 2020. https://www.ibef.org/industry/india-automobiles.aspx 62IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
India’s automobile production is
concentrated in a few regions of the North,
West, and South. However, the vehicles are
sold across the country through dealers
45

at various locations. Hence, there is a
requirement for the extensive movement of
vehicles from the manufacturing plant to
the dealers’ location. The average distance
between the origin and destination locations
for the door-to-door transportation of
automobiles is often greater than 1,000 km,
making these movements ideal for efficient
bulk transport modes such as the railways.
Despite this, less than 5 percent of the total
vehicles are transported by the railways,
and the majority via road. In the last few
years, the Indian Railways has introduced
many changes to improve auto freight
volume carried by trains. An improvement in
the share of rail in the country’s auto freight
traffic has also been seen, particularly
in the passenger vehicle segment. The
percentage of passenger vehicles carried
by railways increased from 1.2% in FY14 to
3.7% in FY18. The target is to increase this
share to 30% by FY24. Many policy changes
have been introduced, and special rakes
have been inducted in the recent past
through suggestions from various industry
stakeholders.
45 Dealers are independent franchises and have direct relations with the OEMs
Share of Passenger Vehicles Carried by Indian Railways of the Total Passenger
Vehicle Production in India
Source: Increasing Rail Share in Freight Transport in India, The Energy and Resources Institute
1,60,0004.0%
1,40,0003.5%
1,20,0003.0%
1,00,0002.5%
80,0002.0%
60,0001.5%
40,0001.0%
20,0000.5%
00.0%
2013-14 2014-15 2015-16 2016-17 2017-18
1.2%
1.7%
2.9%
3.3%
3.7%
Number of Passenger vehicles carried by Indian Railways% Share
The above chart depicts that the
passenger vehicle segment’s rail
share has steadily increased over the
years because of various initiatives
taken by Indian railways in the last few
years (listed below in detail). However,
the growth rate has been lower than
expected (with an average increase of
less than one percent every year) as the
industry faces several challenges to use
rail for transportation of vehicles (listed
below in detail). 63
S.No Original ClauseModified Clause
1.
The applicant had to deposit a
License fee of INR 5 crores to get
a license for 20 years
The applicant has to deposit a License fee of
INR 3 crores to get a license for 20 years
2.
Minimum of 3 rakes had to be
procured by the applicant
Minimum of 1 rake has to be procured by the
applicant
3.
The applicant had to procure full
rake composition, including the
brake van, as notified by Indian
Railways with 4% additional
wagons as spares
The requirement for procurement of
maintenance spare wagon has been reduced
from the existing 4% per rake to 4% of the total
cumulative holding of the AFTO
46 Automobile Freight Train Operator (AFTO) refers to the parties who invest in procurement of rakes and arrange traffic for
loading and unloading in the Auto Freight Trains, owned by the company after obtaining permission from the Ministry of
Railways under this policy.
47 Maruti was the first licensee of the AFTO policy and it contributed significantly in the wagon/rake design, terminal design
48 First third-party logistics provider in India to offer rail-based services under an AFTO licence
Initiatives by Indian Railways, 2013-2018
requirement from 3 rakes to 1 rake (see
detailed table below). As of now, there
are a total of 6 licensees of this policy.
There are mainly two types of rakes used
for the transportation of automobiles -
BCACBM and NMG. The AFTO licensees
own the BCACBM rakes. A BCACBM rake is
a double-deck rake with a composition of
27 wagons and has an accommodating
capacity of ~318 small cars. The Indian
Railways has inducted a total of 26
BCACBM rakes under the AFTO scheme
to date. On the other hand, the NMG (New
Modified Goods) are modified passenger
coaches with a single deck rake that can
accommodate up to ~125 small cars in
25 wagons.
Product Matrix and Sector Specific Case Studies
1. Modification of the AFTO scheme:
One of the key initiatives taken by
Indian Railways is implementing the
Auto Freight Traffic Operator (AFTO)
scheme
46
, initially introduced in 2010
to enable private players to invest in
wagons (BCACBM) and exclusively
operate them as per their requirement.
The AFTO policy was amended in 2013,
followed by further modifications in 2017-
18, to encourage auto companies to join
the scheme. Initially, there were only two
licensees – Maruti
47
and APL Vascor
48
.
The scheme gained some traction after
certain amendments in the policy by
Indian Railways, such as the reduction
in license fees from INR 5 crore to INR
3 crores, decrease in minimum rake 64IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
4.
Auto Ancillaries and Auto Spare
Parts were included in reverse
direction only
As per the policy, the transportation of
Automobile and Auto Spares by AFTOs was
permitted only in one direction. This restriction
has now been lifted. AFTOs will be able to
utilize their rakes for loading in different
directions and will be able to optimize the
utilization of their rakes
5.
If the immediate preceding trip
has been charged at loaded
rates for all wagons, the next trip
was charged at loaded rates for
loaded wagons and empty rates
for empty wagons. This provision
was permitted only for one leg of
the circuit of a rake
Full load charging (even if one wagon is
loaded) and next trip charging on actual
loading basis, which was earlier available for
only one leg of the circuit of a rake has now
been extended to all alternate legs of the
circuit of a rake
Source: Direct Interaction with SIAM
2. Multipoint unloading: The Railway
Board has also approved multipoint
unloading for automobile traffic,
allowing automobile traffic to be
loaded in NMG, BCCNR, BCACM, or any
other similar type of wagon (other than
BCACBM) to unload at multiple points
with a maximum distance of 500 km
between two continues destination
(unloading) points.
49
3. Auto-Hubs: Development of Auto
Hubs for automobile manufacturers
to carry the traffic by rail in bulk and
allow secondary distribution to dealers
in the nearby catchment areas. Auto-
hubs also provides an opportunity to
aggregate automobiles to be able to
offer a full rake load.
50
For example,
auto-hub at Walajabad (Southern
Railway) and Farukhnagar (Northern
Railway). Works are underway for the
up-gradation of facilities at these auto
hubs.
51
4. Online Portal: Introduction of single
window portal by Indian Railways
for customers to informs about any
queries/grievances and place requests
for issues like design modification,
maintenance issues, and any other
suggestions. Indian Railways has
also been organizing workshops and
discussions with the Auto companies
and RDSO on the optimum utilisation
of rakes and its design.
49 Indian Railway. 2020. http://indianrailways.gov.in/railwayboard/uploads/directorate/traffic_comm/Freight_
Rate_2020/RatesCircular%20No_%2019%20of%202020.pdf
50 Automobile hub in Indian railways – Indian railway news. Indian Railway News. https://indianrlynews.wordpress.com/
tag/automobile-hub-in-indian-railways/
51 Railways emerges as the preferred carrier of automobile in the country. Press Information Bureau. https://pib.gov.in/
PressReleaseIframePage.aspx?PRID=1530554 65
Challenges faced by the Auto Industry
quickly and moved to a safe location. The
loading and unloading of vehicles is also a
challenging process as companies get only
8 hours to load/unload the vehicles on rakes;
otherwise, a penalty in the form of stabling
charges is levied. Loading/unloading within
the specified time is difficult during the
peak season, while in the lean season, 30
percent of the rakes remain underutilized.
Transportation via rail for short distances is
costly to companies and time-consuming.
53
However, in 2020, auto traffic movement
by rail has witnessed a significant jump
as compared to the previous year. Before
that, an average share of 10 percent of the
monthly volumes of auto companies was
dispatched by trains. This share increased
to 13 percent of the total monthly volumes in
August 2020. In August 2020, 243 automobile
rakes were loaded as compared to 127 last
year for the same period. In the absence
of passenger trains, railways’ transit time
has improved by 40-50 percent (enabling
timely delivery of cars to the customers),
and the speed has also doubled from 23
kmph to 46 kmph. Railways have attracted
more automobile traffic due to the reduced
congestion on tracks and increased speed
of trains, and also the limited availability of
truck drivers, and the disruptions faced by
truckers on the road network due to several
restrictions during the pandemic. The table
below lists in detail the industry players’
challenges and recommendations based
on suggestions made by the stakeholders.
52 A rake’s progress in India: How one 3PL is growing rail services for finished vehicles. Automotive logistics. 2019. https://
www.automotivelogistics.media/policy-and-regulation/a-rakes-progress-in-india-how-one-3pl-is-growing-rail-
services-for-finished-vehicles/39053.article
53 Direct Interactions with Industry Players
Product Matrix and Sector Specific Case Studies
Despite a rise in automobile transportation
by rail in the last few years, the share
of railways in automobile movement is
significantly low. In the passenger vehicle
segment, most transportation occurs via
roads using trucks and trailers (around
95 percent). The rail penetration in auto
freight is low in India compared to other
countries. For example, automobile freight
traffic is 40 percent in Europe and more
than 70 percent in the United States.
52

The automobile industry manufactures a
high-value product, as a result of which
the industry is sensitive to the transit costs,
which often determine the final margin of
their profits. The majority of automobiles’
transportation occurs via road because of the
ease of transportation, minimum intervention
in handling, and assured transit time. Once
the vehicles are loaded on trucks or trails, it is
easy to transport them to the final destination.
Vehicle movement by rail has certain
limitations in the country. One of the major
challenges for auto companies is multiple
handling of vehicles. There are other
challenges such as the design of rakes as
they cannot accommodate double stacking
of Sports Utility Vehicles (SUVs). The first mile
includes moving the cars by trucks to the
nearest railway station, which takes around
two to three days. It involves various costs
such as the cost of trucks, drivers, fuel, and
parking. A similar cost is incurred for the
last mile, and vehicles have to be unloaded 66IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Challenges and Recommendations to Increase Share of Rail in Domestic Automobile
Movement
ChallengeRecommendationActionable
Infrastructure
Design of rakes
In passenger vehicle
segment design of
BCACBM rakes doesn’t
allow the loading of
SUVs in both decks.
In the two-wheeler
segment, side loading
of vehicles in BCACBM
rakes is not possible.
Two-wheelers have to
be driven from one end
to the other.
A BCACBM rake can
carry about 3000 two-
wheelers
Demand for Sports Utility Vehicles
(SUVs) is growing, and its share is
expected to increase. Railways can
tap this traffic by upgrading wagon
height to taller wagons to allow double
stacking of SUVs.
The two-wheeler segment constitutes
80 percent of the automobile industry.
More than 90 percent of the two-
wheeler movement is by road. There is
huge potential in this segment to shift
the freight traffic to rail. Some of the
suggestion by industry players include:
Allow sideloading of two-wheelers in
the BCACBM rakes for faster loading/
unloading
Medium to
Long Term
Multiple
Handling and
First Mile
The first mile by
railways involves
multiple handling, cost,
and time. It takes 2-3
days from aggregating
demand to moving
cars in trucks to the
nearest railway station
Sidings in automobile plants will
avoid multiple handling and first-mile
problem. Efforts are needed to identify
specific locations of automobile plants
where railway sidings could be put
in place, and having sidings inside
automobile plants will avoid both
multiple handling and first mile issues.
The industry has suggested the
option to transport trailers, loaded
with vehicles, through Railways. RDSO
could jointly work with Commercial
Vehicle Manufacturers to check if it
is feasible to develop trailers, which
can be coupled to the Tractor and the
Railways for interchanging from road
to rail and vice-versa.
Medium to
Long Term 67
Terminal
Infrastructure
and Auto Hubs
Lack of basic terminal
infrastructure and
security at Auto-Hubs.
The slow process of
getting approvals for
upgrading Private
Freight Terminals
Upgradation of terminal and siding
infrastructure and Auto Hubs with
loading/unloading infrastructure
like movable ramps, trailers, all-
time electricity, uniform flooring of
approach roads, service facilities
for the safety of vehicles, and dust-
free parking space. All of this can be
attained Public Private Partnership
Short to
Medium
Term
Rake
unavailability
and lack of
maintenance
Rake unavailability,
poor maintenance,
and low quality of
rakes discourage the
customers to use rail
Ensure good quality rake provision to
the auto companies. Frequent quality
checks to ensure the safety of vehicles
during transit via rail
Short to
Medium
Term
Operational
Lack of
Assurance in
Transit Times
Lack of Assurance in
Transit Time makes
it difficult for OEMs/
logistic companies to
ensure timely delivery
of vehicles to dealers/
consumers Preparing realistic timetables and
adherence to the schedules is
essential to sustain the confidence.
Improvement in Assured Transit Time
during the Covid-19 pandemic has
strengthened the confidence of Auto
companies in Railways
Short to
Medium
Term
Freight
Rationalisation
Rail is not economically
viable and competitive
to the road for shorter
distances
To make railways competitive to the
road for distances less than 1,000 km
- railways should consider reducing
freight rates of NMG and BCACBM
rakes
Short to
Medium
Term
Demand
Aggregation
and Stabling
charges
Cumulating bulk
demand for the BCACBM
rakes is challenging for
companies. A penalty
in the form of stabling
charges is levied if
loading/unloading
exceeds 8 hours’
time limit
Indian railways should consider
increasing the loading/unloading
time limit at the stations from 8 hours.
The time limit should be based on the
total number of cars at the station or
should vary from lean demand and
peak demand period
Short to
Medium
Term
Response to
requests and
queries
Delayed response
to the requests,
complaints, and queries
of Auto companies
Fast and quick response to customers’
requests on use of terminals, land
lease, etc. Companies appreciate
railways initiative to launch online
portal and a single window concept
for this purpose
Short Term
Product Matrix and Sector Specific Case Studies 68IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Policy Related
AFTO policy
The uptake of AFTO
policy is slower than
expected. Several
factors like the
insufficient number of
rakes, high lead time
of indent placement
to rake availability
discourage OEMs and
3PL to use rail.
Multi point unloading
is permitted for rakes
NMG, BCCNR, and
BCACM
The AFTO policy has been appreciated
by industry players. However, the
suboptimal infrastructure and
challenges by rail have resulted in low
uptake of the policy. The fees for the
AFTO policy can be revised further, as
in addition to the fees (INR 3 crores),
the companies have to invest in the
rakes (INR 15 crores). A further revision
in the AFTO fees by Indian Railways will
help in attracting more companies to
join the scheme.
Allow multi-point unloading of
BCACBM rakes
Short to
Medium
Term
Slow approval
process
The design approval
process by RDSO takes
1-3 years, depending
upon the complexity
of design and RDSO’s
capacity
The rolling stock design and approval
process should be simplified, and the
process to get approvals for designs
and implementation of wagons should
also be relaxed by the RDSO
Medium
Term
Exports
Infrastructure
development for
exports to neighboring
countries
Development of infrastructures such
as more loading terminals across the
country facilitating auto exports via
rail to neighboring countries such as
Nepal, Bangladesh, and Sri Lanka. For
example, Railways loaded 87 Mahindra
Bolero pick-up vans from Navi Mumbai
in Maharashtra and transported to
Benapole in Bangladesh in October
2020.
54
Medium
Term
Source: Direct Interaction with stakeholders
54 Mahindra exports Bolero pickups to Bangladesh on Indian Railways network. 2020. https://www.autocarpro.in/news-
national/mahindra-exports-bolero-pickups-to-bangladesh-on-indian-railways-network-77558 69
5.3 Case Study: Cement
Cement has been an essential commodity
for rail freight in India. It is the second-largest
revenue source for the Indian Railways and
contributed around INR 10,166 Cr of freight
revenue in 2018-19 (~10% of the Indian
Railways freight earnings). However, rail,
which is considered the most economical
mode of transport for cement and clinker,
has been shifting to the road. It is a transport
intensive industry because of the need to
move raw material and finished goods to the
destination. Hence, the logistics cost forms
a significant component of the total cost,
about 20-25 percent of the cement delivery
value chain.
55
The modal share for cement
by rail has been declining for the last several
years from 52 percent in 1999 to 32 percent
in 2011-12 to about 23 percent in 2018-19.
56

The cement rail coefficient has also declined
from 43 percent in 2013-14 to 35 percent in
2018-19. A decline in rail share is caused
mainly because of higher rail freight and an
increase in the intra-regional movement
or short-distance movement of cement. In
the presence of a large number of cement
suppliers, high regional price variation, the
cement manufacturers find it profitable to
transport cement to adjoining regions instead
of long distances.
57
Cement movement for
lower distances (less than 250-300 km) is
more economical by road than rail, which
has additional costs of multiple handling
and last mile. Cement manufacturers
find rail cost-efficient for higher distances
greater than 700km. Rail being the primary
medium for cement movement for decades,
has been dominated by road over the
past few years.
55 Logistics. Cement Manufacturers Association. https://www.cmaindia.org/key-areas/logistics/
56 Logistics. Cement Manufacturers Association. https://www.cmaindia.org/key-areas/logistics/
57 Cement transportation by railways falls 11.8%. Live mint. 2012.https://www.livemint.com/Home-Page/
RtDcTygseYUWwpaC4zxpML/Cement-transportation-by-railways-falls-118.html
Product Matrix and Sector Specific Case Studies
Percentage of Cement Carried by Indian Railways of Total Production and Imports
Percent
50 43
40
373737
35
40
30
20
10
0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Source: Indian Railways Yearbook
Contemporary cement is commonly
referred to as Portland cement, which
is produced in various forms. It can be
distinguished by attributes such as main
raw materials and their composition. The
main constituents or raw materials such
as clinker, limestone, gypsum, silica fume,
and fly ash etc. are used to manufacture 70IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
58 Indian cement industry analysis. Business Opportunities in India: Investment Ideas, Industry Research, Reports IBEF. 2014.
https://www.ibef.org/download/Cement-August-2014.pdf
59 Indian cement industry analysis. IBEF. 2021. https://www.ibef.org/industry/cement-presentation#:~:text=A%20total%20
of%20210%20large,%2C%20Rajasthan%2C%20and%20Tamil%20Nadu.
cement in different proportions depending
on the form of cement. Cement
manufacturing occurs in two stages. In
the first stage, clinker is produced in a
furnace by heating raw materials (mainly
limestone) and small amounts of other
materials. A resulting chemical reaction
yields a molten substance, which forms
clinker after the substance is rapidly cooled.
In the second stage, clinker is grounded
with gypsum and other materials which
yields cement in the form of a grey powder.
The manufacturing of cement occurs on
cement lines at production plants. These
plants are mostly situated near quarries
with deposits of limestone and other raw
materials consumed during the production
of cement. Cement manufacturing is one
of the most capital intensive industries as
it involves high capital costs to construct a
cement plant.
The Indian cement industry ranks 2
nd

largest in the world in terms of production.
In 2018, 502 million tonnes of cement was
produced in the country, which is around
8 percent of the global installed capacity.
The industry comprises mostly of regional
players with an increasing local presence.
For instance, southern and western
regions have the highest production (70
percent of India’s production) and highest
demand (60 percent of India’s demand).
In the southern region, Andhra Pradesh
has the highest installed capacity, which
is around 49 percent of the region’s total
installed capacity. Madhya Pradesh,
Gujarat, and Rajasthan have the highest
installed capacity in Central, Western
and Northern regions. At the same time,
Chhattisgarh leads the Eastern region with
35.5 percent of total installed capacity
in the region.
58
Of the total capacity, 98
percent lies with the private sector and the
rest with public sector. There are around
100 cement companies in India, 210 large
cement plants, 350 mini cement plants.
However, the top 20 companies account
for more than 70 percent of the country’s
cement production.
59
The majority of the
large cement plants are located in Andhra
Pradesh, Rajasthan, and Tamil Nadu.
On the other hand, many small and mid-
size cement companies are increasing
across regions to cater to the rising
demand of cement. The cement industry is
growing at a rate of 6-7 percent per annum.
With increased spending on infrastructure
and housing, development of smart cities,
investment in railways and roadways –
the cement industry is expected to grow
further in the coming years.
However, there are various challenges
involved in the movement of cement in
the country, which forms a significant
share of the total cost of cement. The
movement of cement involves inward and
outward movement. Inward movement is
the transportation of raw materials (coal,
gypsum etc.) to cement plants. Outward
movement is the transportation of cement
and clinker from manufacturing plants to 71
ModeCostQuantityEfficiency
Road INR 3 to 4 per ton per km 30 to 40 tonnes per truck Low efficiency
Rail INR 1.5 per ton per km (plus
last-mile cost)
2,000 to 3,000 tonnes per rakeVery high
efficiency
Source: Direct Interaction with logistics department of a leading player from the industry
60 Eligibility criteria for LTTC contract – 1 million tons p.a. of traffic via IR for existing customers and for new customers 3
million tons of guaranteed traffic over the duration of the contract (3-5 years) and at least 1 million tons of traffic in
the first year; However, Ministry of Railways scrapped the LTTC policy in 2020. https://www.thehindubusinessline.com/
economy/logistics/ministry-of-railways-ends-long-term-traffic-contract/article33387422.ece
61 https://www.livemint.com/Money/VLSashnKfvMR7pMlaEd9RM/A-long-haul-for-railways-to-win-back-cement-freight.html
62 https://www.irfca.org/faq/faq-freight.html
Product Matrix and Sector Specific Case Studies
the final destinations. The requirement
to transport raw material and finished
goods to the destination make cement
a freight intensive industry. Since a large
portion of the cement demand is regional
(within 300 km) it is cost-effective for
the companies to use the road for the
movement of goods. However, the modal
choice depends on various other factors.
The long lead transportation cost per
ton of cement is less via rail than road;
however, the last-mile cost in rail leads
to a significant increase in the overall
transportation cost.
loading bagged consignments in open
and flat wagons, upgrading wagon design
from BOX/ BOXN type of wagons to BCN,
introduction of wagon design from BCN
rakes (~2300 tonnes of capacity) to higher
capacity rakes BCNHL (~4000 tonnes of
capacity), etc. which have increased
efficiency to a certain level. Allowing
cement transportation in mini rakes, which
carries half of the load (20 BCN wagons,
~1100 tons) as compared to full rake (40
BCN wagons ~2200 tons) and two-point
rakes that can be loaded and unloaded at
two-points, usually a half-rake at a time,
at pre-approved combinations of loading
and unloading points.
62

After the onset of Covid-19 pandemic,
Railway Board has extended significant
efforts to introduce positive changes to
There are various issues faced by cement
companies in rail transportation that
increase the cost, such as sourcing of raw
materials from plants, first and last-mile
cost, multiple handling, warehouse cost,
losses due to damage of bags, railway
charges such as wharfage and demurrage,
etc. However, Indian Railways has taken
many initiatives to improve the share of
cement freight volume. Many schemes
and policies have been introduced by
Indian Railways, such as the LTTC (Long
Term Tariff Contract)
60
under which
cement companies provide a minimum
guaranteed freight traffic – incentives of
LTTC include the provision of a minimum
guaranteed volume-linked discount
based on incremental growth in traffic.
61

Additionally, other schemes such as own
your wagon, freight incentive scheme for 72IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
ChallengeRecommendationActionable
Infrastructure
Design of rakes
Aggregation of demand
to load a BCNHL rake of
4,000 tons of capacity is
challenging during the
lean season. Loading in
these rakes using the
available mechanization
is also difficult as the
height of the door is less
than the wagon height
Allow mini rakes (with a capacity of
~2000 tons) and two-point rakes for the
transit of smaller volumes to better serve
the market throughout the year (based
on industry demand). To increase rake
utilization, allow multiple companies with
a common destination to fill the rake
load jointly. Loading is efficient if the
mechanization is compatible with the
wagon design
Short to
Medium
term
63 2020 figure till Oct 2020. Source - Industry discussions
increase freight traffic and has been very
supportive of cement companies’ freight
movement. This has led to an increase in
rail share of cement from 21 percent in 2019
to 23 percent in 2020.
63
However, there are
several challenges faced by the cement
companies that need attention in the
short run to improve cement freight traffic
by Indian Railways. For example, due to the
poor condition of roads near rail sidings,
higher capacity trucks cannot be used.
More number of smaller trucks are used
for transportation. For instance, cement
transportation that could be completed
by 100 high capacity trucks takes 200-250
small trucks to finish the process.
Railways earn maximum revenue through
freight operations and optimizing loading
operations is one of the important steps in
increasing revenue. Railways can increase
traffic by improving rail connectivity to the
upcoming or new cement plants. Building
infrastructure such as warehouses, storage
(good sheds), improving connectivity, or
building connectivity to the plant siding
can increase the potential rail share freight
of cement. Similarly, smooth unloading
is necessary so that wagon becomes
available for the next loading. Reducing the
time taken for unloading by addressing the
infrastructural issues, using technology,
and deliberation with industry players will
improve rake availability and transit time.
Some of the identified challenges and
recommendations are detailed below.
Challenges and Recommendations to
Increase Share of Rail in Domestic Cement
Movement
Challenges and Initiatives for Cement Movement by Indian Railways 73
Product Matrix and Sector Specific Case Studies
Terminal Sidings
and Good Sheds
Lack of basic
infrastructure at terminal
sidings and Good Sheds
Investment in basic infrastructure at
the terminal sidings and Good Sheds.
Electricity and lighting for night time
unloading and operate machinery,
uniform approach roads to the terminals
allowing higher capacity trucks to enter
the terminal, availability of labour for
night time unloading, clean platforms,
and sanitation facility for the labour.
Safety and security of storage of goods
by installing cameras and deploying staff
to look after the goods
Medium to
Long term
Rake
Unavailability
Rake unavailability
especially during
peak season, impacts
delivery time. The time
between rake indent and
availability varies from
3-4 days compared to
less than one day for the
road
Low supply of wagons and uncertainty
for cement and clinker movement is one
of the reasons causing a shift by industry
players from rail to road. Improving rake
availability based on industry demand,
conducting industry dialogue during
wagon planning stage, preparing a
futuristic plan for transparent allocation
of rakes (considering peak and lean
season of the industry) will help in
increasing cement freight
Short to
Medium
term
Bulk loading
Lack of bulk cement
infrastructure for
movement by rail. At
present bulk cement is
around 5% of the total
cement industry
Railways offer various advantages
for bulk cement movement - such as
reduction in loss of cement, no seepage
due to multiple handling or bag bursts.
Bulk wagons can carry more cement.
Railways can tap into the growing
bulk cement market by investing in
infrastructure (terminals and Good
Sheds) for bulk cement handling
Medium to
long term
Operational
Round the clock
unloading
Round the clock
unloading is not
permitted across all
terminals
Allow round the clock unloading to
improve wagon turnaround. Ensure staff
availability to handle traffic at Good
Sheds and terminals
Short term 74IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Demurrage
and Wharfage
Charges
64
Delay in unloading
leads to penalties in the
form of demurrage and
wharfage charges
Operational efficiency can be improved
by considering a phased reduction of
demurrage and wharfage charges,
especially when the delay can be
attributed to the railway operations
Medium
term
Lack of
Mechanization
and Labour
Unions
Loading and Unloading
of cement bags is a
labour intensive and
manual process. Non-
mechanized unloading
and the presence of
labour unions increases
cost and operating time
for the industry
Mechanization of unloading process and
non-unionized labour can improve the
efficiency and productivity of labour. Use
of carts and forklift trucks to unload the
goods will help in faster unloading
Medium to
Long term
Detention of
Rakes
Detention of rakes at
terminals increases
transit time and
congestion at terminals.
Blockage of working
capital of cement
companies due to
uncertainty in rake
movement. Operations of
companies are affected
when the movement of
raw materials stops due
to rake detention
A regular check on the detention of trains
outside signals or at stations adjacent to
Goods Terminals, in shunting operations
at roadside stations and enroute
detentions
Short to
Medium
term
First and
Last Mile
Connectivity
Unorganized first and
last mile services add
up to the time and cost.
Handling and last-mile
services provided by
small and unorganized
players often results in
inadequate manpower
deployment and
mechanization for goods
handling
Handling and last-mile problem can
be addressed if Railways focuses on
establishing a separate transportation
unit for handling and the connectivity
services.
An increase in cement and clinker
production will increase rail freight
movement.
65
Connecting cement
clinkerization units to the railways will
help in addressing the first-mile issue
by rail.
Medium to
Long term
64 Demurrage charges are levied for the detention of any rolling stock after the expiry of free time, if any, allowed for such
detention. Wharfage is the charge levied on goods for not removing them from the railway after the expiry of the free
time for such removal. 75
Policy Related
LTTC Policy
Strict eligibility criteria of 1
million tons of production
for the LTTC contract is
challenging for small and
mid-sized firms
Reducing the eligibility criteria for LTTC
contract will help attract more cement
firms (including small and mid-sized).
For example, a reduction in AFTO
scheme fees from INR 5 cr to INR
3 cr helped in a small uptake in
the number of participants from
the Auto sector. The number of
participants increased from 2 to 6
after the reduction in fees and other
amendments in the policy
Short to
Medium
term
Source: Direct Interaction with stakeholders
65 B., Saurabh. B., Palash. Gupta, D.B. Factors impacting railway freight traffic in India. 2016. https://www.ncaer.org/
publication_details.php?pID=264&pID=264
66 Indian Railways Yearbook. Ministry of Railways.
67 Opportunities in the Foodgrain Sector in India. Ministry of Food Processing Industries, Government of India. foodprocessingindia.gov.in
Product Matrix and Sector Specific Case Studies
5.4 Case Study: Food grains
Production of Food Grains (Million Tonnes)
2014-15
252.02251.54
275.11
285.01284.95
2015-162016-172017-18 2018-19 (4
th
AE)
Source: Indian Railways Yearbook
In India, agriculture is the primary source of
livelihood. The sector provides livelihood to
58 percent of the country’s population. The
gross value added (GVA) by agriculture,
forestry, and fishing was estimated at
INR 19.48 lakh crore (USD 237.37 billion) in
FY 2019-20. India is the second-largest
producer of foodgrains globally. The total
production of foodgrains in 2018-19 (4
th

Advance Estimate) was 284.95 MT
66
. In
India, different varieties of grain (especially
cereals & pulses) are produced, which are
mostly consumed domestically. However,
the basmati rice grown in the country has
been well-received by the global market.
Cereals have gained massive demand from
the global market. In the year 2016-17, the
export of cereals stood at USD 6074 million
67
. 76IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
68 The Food Corporation of India is an organization created and run by the Government of India. It is a statutory body under the
Ministry of Consumer Affairs, Food and Public Distribution, Government of India, formed by the enactment of Food Corporation
Act 1964
Of the total foodgrains production,
around 40-50 percent of the total market
surplus of rice and wheat is procured by
the Government of India, dominating as
a buyer in the market. For a few states,
such as Punjab and Haryana, 80-90
percent of the produce is purchased by
the government. Such large procurements
have made the government largest and
dominant buyer of rice and wheat in the
domestic market. In terms of quantity,
40-42 million tonnes of foodgrains are
transported by the Food Corporation of
India (FCI)
68
across the country in a year.
The movement operation of foodgrains
undertaken by FCI encompasses around
1,906 FCI owned and hired depots/Slios,
557 railheads (owned by Indian Railways),
and 98 FCI own sidings.
The majority of the procurement carried by
the FCI is transported through railways. As
per Indian Railways Yearbook, the revenue
generated for railways through foodgrains
during 2018-19 was INR 7,615.98 crore, whereas
the same for the year 2017-18 was INR 8,402.81
crore, resulting in a 9.4 percent revenue
decrease. As per the economic survey 2017-
18, the Indian Railways freight movement’s
share has gone through a declining period.
With the decline in freight movement, various
initiatives were taken in 2017, including traffic
rationalisation and new policy guidelines for
stations to stations rates, etc.
Percentage of Total Production Plus Imports in Foodgrain Carried by Indian Railways
During Last 5 Years
18.13
22.01
15.95
15.26
13.78
2014-152015-162016-172017-182018-19
As per 2018-19 provisional data, 13.78%
of the total production plus imports
were carried by the Indian railways.
The country's foodgrain sector is
highly dependent on factors such as
seasonal demand for the domestic
and international market, in the case
of unseasonal change, similar to 2014,
which affected grain production, leading
to a decline in total estimated output
by nearly 5.5 percent. Other factors
such as decline in foodgrains (cereals) 77
69 Report of the Committee for Doubling Farmers’ Income, Volume III - Post-production Agri-logistics: maximising gains for
farmers. Department of Agriculture, Cooperation and Farmers’ Welfare, Ministry of Agriculture & Farmer’s Welfare. 2017.
http://farmer.gov.in/imagedefault/DFI/DFI%20Volume%203.pdf
70 Report on Doubling Farmers Income
71 COVID-19 impact: Indian railways to earn whopping Rs 30,000-40,000 crore less from passenger trains. The Financial
Express. 2020. https://www.financialexpress.com/infrastructure/railways/covid-19-impact-indian-railways-to-earn-
whopping-rs-30000-40000-crore-less-from-passenger-trains/2038784/
Product Matrix and Sector Specific Case Studies
consumption pattern and substitution
by non-cereals have also impacted
foodgrain's movement across the
country. As per NSSO, the rural and urban
demand for cereals has been decreasing
steadily, whereas it is increasing for
non-cereals rapidly. The decentralised
procurement over different states has
impacted the foodgrains traffic of Indian
Railways, mostly relying on the movement
of foodgrains from states of Punjab and
Haryana to other states.
According to Doubling Farmers Income
Report
69
, the market produce is the primary
source of income for farmers. The lack of
connectivity to ensure that their harvest
reaches the market in time results in
lowering farmers' ability to monetise their
produce. In the case of perishable items,
lack of connectivity is even more critical.
Such facilities, especially cold storage,
exist in areas, but it is to be understood
that these storage facilities are confined
mostly to certain crop types (perishable
produce) and not integrated with other
requirements. Around 16 percent of the
target set for creating integrated pack-
houses, reefer trucks, cold storage, and
ripening units have been met. A gap of
around 84 percent in achieving the target
on improving the state of storage and
transportation of the farm produce still
exists. In India, the majority of foodgrains
are transported through the road
network
70
. Higher use of roadways for
transportation in the foodgrains sector
is mainly due to proper connectivity with
major domestic markets, timely delivery
of commodities, assurance, and ability to
connect to remote areas. In the case of
railways, the cost is lower for commodity
transportation, but due to lack of proper
channels, aggregators, connectivity,
and carrier transport, the mode is used
less frequently.
Several initiatives have been taken up
by the Indian railways to boost freight
operations amid challenges due to
COVID-19. During this period, the national
transporter has achieved record loading
of food grains, 80 percent
71
more than last
year. Utilizing the COVID-19 period, Indian
Railways has substantially increased the
speed of freight trains. Introduction of
Kisan Rail, an initiative to build a national
cold supply chain for perishable goods
including meat, milk, and fish. The rail
will comprise of refrigerated coaches in
express and freight trains. The focus of
this initiative is on the transportation of
perishable goods at affordable prices.
This initiative is based on the public-
private partnership model to provide
a seamless supply chain of perishable
goods. Railways working with FCI moved
more than 800
72
rakes carrying over 20
lakh MT foodgrains across the country
between March 24, 2020, and April 11, 2020. 78IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
72 Railways transports 6.75 lakh wagons of commodities across country since March 23: Officials. Mysuru Today – Online
News Paper Portal. Mysore news. 2020. https://citytoday.news/railways-transports-6-75-lakh-wagons-of-commodities-
across-country-since-march-23-officials/
Challenges relating to the procurement
of foodgrains through rail observes
infrastructure as key issues, however,
issues which are related to other sector
apply to foodgrains as well. Change
in consumption pattern in both urban
and rural areas require diversification of
agricultural produce and value addition
process. With the growth in per capita
income, the consumption pattern has
undergone a significant change, which
would constrain the conventional pattern
of foodgrains movement by Indian
Railways carried out earlier.
ChallengeRecommendationActionable
Connectivity
Lack of access to reach
designated market/mandis,
storage and post-harvest
management
Indian Railways with public and
private partnership should provide
support to farmers to reach their
nearby markets. Since railways have
a higher penetration in rural areas,
however, connectivity between farmers
and organised mandis/market is an
issue. As per the National Farmers
Commission, the average distance
of the market should be within 5 km.
Introduction of mechanism wherein
intermodal connectivity can be used
for procurement of grains from the
rural parts of the country.
Remove information Asymmetry to
keep the price in check
Comprehensive agricultural
logistic – providing integrated
post-harvest management
solution with value-added
services to fill in the gaps
Short to
Medium
Term
Challenges and Recommendations to Increase Share of Rail in Domestic Foodgrains
Movement 79
Product Matrix and Sector Specific Case Studies
Infrastructure
Lack of infrastructure such
as warehouses and storage
facilities
Indian Railways has a vast network
and connects rural areas to urban
areas. With such connectivity, it is
the primary source for transportation
of foodgrains from farm-gate to
organised markets.
Development of an integrated
warehouse for storage of foodgrains
with proper facilities and amenities at
freight terminals is important.
There is an urgent need to build a
viable load for carrier or transport.
Aggregation centres are required
which will serve as a loading and
dispatch facility at village and
block level.
Dry goods storage system is
required for long term holding
crops. This can be achieved
through modernisation of existing
infrastructure and improved
inventory management
Medium
Term
Operational
Line capacity and, terminal
Infrastructure are not
developed to meet the growing
demand of the sector resulting
in delays in transit time and
increased wastage
Involvement of private players in an
increased movement of Kisan special
trains to transport perishable goods
for dedicated routes and seasonal
commodities
Increase wagon utilization level
by inducting commodity specific
wagons instead of a common pool
of wagons
Short to
Medium
Term
Source: Direct Interaction with stakeholders 80IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT Challenges and
Reforms
CHAPTER 6 82IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
6.1 Challenges in the modal shift to Rail
From 2008 to 2018, the Indian railways
witnessed an increase in volume of 35
percent in the passenger segment and 55
percent in the freight segment. However,
the investment in rail infrastructure has
increased at a much smaller pace than the
traffic. Over the years, the focus of Indian
railways has been on carrying the bulk-
commodities. There has been little effort to
accommodate non-bulk goods. It has led
to a loss in the uptake of commodities that
often move in smaller lot sizes. For long–
haul freight routes, the road is approximately
25–30% costlier than railways for distances
less than 500 km, much higher than the
global standards.
73
Though the truck
distance travelled per day is constrained
Operational Inefficiency Suboptimal Infrastructure
Lack of Integrated
Connectivity (First
and Last Mile)
Low Capacity Utilisation of Cargo
Wagons in Passenger Trains Sub-optimal Design of
Wagons
Issue of Multiple
Handling
Lack of Assured Transit Time
Inadequate Terminal
Infrastructure
Additional Cost due
to Lack of Intermodal
Infrastructure
Multi-point Unloading and
Demand Aggregation Issue
Lack of Intermodal
infrastructure
First and last-mile
Connectivity
Huge Cost Difference Between
Movement by Road and Rail
Delays in targeted completion
of DFC, a flagship project for
freight movement
Uncertainty in Rake Supply Overutilization of Line Capacity
Slow Response Mechanism
Small Share of Non-Bulk
Commodities
by various challenges, such as poor
road infrastructure, single lane access
in some areas, lack of efficient traffic
management, and tolls and octroi, which
increase the cost of freight transportation
via roads. Despite these obstacles, the
freight movement share is skewed towards
roads mainly because of the flexibility of
door-to-door service provided by road
transportation. The national transporter
faces several infrastructural, operational,
and connectivity challenges leading to a
shift of freight traffic to roads. In addition
to the constraints, the substandard railway
service poorly affects the customer
satisfaction levels, which discourages
them from using rail.
73 Indian Railways Re-birth of the Colossus. Edelweiss. 2017 83
High Maintenance Time of Rakes
Lack of Adequate Investment
in Marketing
Slow speed of Trains
Source: Detailed Discussions with Stakeholders
Challenges and Reforms
6.1.1 Operational Efficiency
One of the primary determining factors
of modal choice for freight transportation
is the time component of logistics. Direct
interactions with industry stakeholders
cite concerns around timely delivery of
services by Indian Railways, which is one
of the reasons for the shift in freight traffic
to roadways. The transit time by road is
much lower as compared to rail plus road.
In most of the routes depicted in the chart
below, it takes almost double the time to
transit goods via rail (plus road) against
roads only. Shippers expect better service
levels and proper handling of their goods
when transported via rail. Absence of
timetabled services, inconsistent supply
of rakes, and lack of integrated first and
last-mile connectivity impacts the transit
time and increases the cost of freight
operations for the customers.
Transit-time via road and Rail plus road
Delhi- Chennai
Transit-Time in Hours
Delhi- Guwahati
Chennai- Kolkata
Bengaluru- Kolkata
Hyderabad-Delhi
Delhi-Kolkata
Delhi-Bengaluru
400
350
300
250
200
150
100
50
0
Rail and RoadRoad
Source: Increasing Rail Share in Freight Transport in India. The Energy and Resources Institute
Lack of Assured Transit Time: In freight
movement, guaranteed transit time
with less variability is a priority for
the customers, the absence of which
increases the operational cost. Highly
congested networks and detention 84IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
of trains causes uncertainty in rake
movement and delays in product
delivery. Lack of this significant service .i.e.
assurance of transit time, prevents Indian
Railways from attracting an increased
volume of freight traffic. Commodities
such as cement, automobile, FMCG,
and pharmaceuticals are highly time-
sensitive, and the logistics cost is a
significant component of the overall
cost. With high inventory holding costs in
sectors such as automobiles, transit time
assurance is essential for the OEMs. The
container movement is also affected by
the lack of assured transit time.
Uncertain Rake Supply: Uncertainty in
rake supply and unplanned allocation
discourage customers from using rail.
Erratic supply of rakes during peak
season, even to customers with high
loading volume, increases dependency
on the more secure mode .i.e. road. For
commodities like cement, inadequate
supply of rakes is a major issue as it is a
transport intensive industry, and there is
a need to move raw material as well as
finished goods to the destination. The
low supply of wagons and uncertainty
for cement and clinker movement
is one of the reasons causing a shift
by industry players from rail to road.
Similarly, consumers from the automobile
companies have conveyed a shortage of
rakes during the peak season.
Design of Rakes and Demand
Aggregation Issue: Inappropriate
wagon design restricts loading gauge
and leads to demand aggregation
issue (in case of high capacity wagons).
Delay in loading and unloading attracts
penalties in the form of demurrage,
wharfage, and stabling charges.
For example, the automobile sector
currently has a small share in rail freight
but has huge growth potential. However,
it is constrained by the limited supply of
specialist wagons; and the rake design
of BCACBM rakes limits the carriage of
larger SUV type vehicles.
Slow Response: Delayed response on the
requests, complaints, and queries of the
customers, such as the use of terminals,
approval for land lease, etc., results in
customer dissatisfaction. Slow decision
making, inadequate market orientation,
and lengthy project approval cause a
shift from rail to road.
6.1.2 Suboptimal Infrastructure
Delay in providing adequate infrastructure
and sharing of lines by passenger and
freight trains is one of the reasons causing
significant traffic shift from rail to road. The
customers face various challenges while
transporting through rail such as lack of
basic terminal infrastructure, maintenance
of good sheds and warehouses, and
unavailability of wagons as the rolling stock.
This results in high congestion, customers
face high network congestion, lower service
levels, and delay in transit time. 85
Challenges and Reforms
Indian Railways: Line Capacity Utilisation
25%
45%
20%
40%
15%
35%
10%
30%
5%
0%
34%
Less than 80%
19%
Between 80 to 100%
40%
Morethan 100%
7%
One Train System Only
Source: Indian Railways Lifeline of the nation, Government of India, Ministry of Railways, 2015
Lack of terminal infrastructure:
Unavailability of terminal infrastructure,
such as uniform approach roads, electricity,
mechanization, and sanitation facility, is
a vital factor resulting in a falling share of
freight by railways. Smooth entry and exit
of freight vehicles is necessary for efficient
loading and unloading operations, however,
the area around a railway station comes
under the jurisdiction of state government/
urban local body and coordinating between
different agencies can be a challenge. Lack
of basic infrastructure leads to decreased
labour productivity, higher wastage, and risk
of damage to the goods. For example, due to
the absence of approach roads to terminals,
higher capacity trucks cannot enter the
terminal and have to be substituted by
large number of smaller trucks. Loading
and unloading at night become difficult
due to poor lighting and lack of electricity.
Improvement in the infrastructural quality
will help in augmenting terminal capacity
and improving rake turnaround time.
Line capacity overutilization: Over
utilisation of line capacity leads to high
network congestion at most routes,
uncertainty in wagon availability, increased
detention time of wagons causes a delay
in rake placement and freight movement,
and low-performance services for the end
consumer. Based on a study by Indian
Railways, 40 percent of the total 1,219 high
density and other important networks
are running at a capacity of more than
100 percent. In comparison, the optimal
utilisation should be around 80 percent.
74

Lack of investment in Rolling Stock: Rolling
stock in Indian railways has increased at
a surprisingly low rate compared to the
74 Indian Railways Lifeline of the nation. Government of India. Ministry of Railways. 2015 86IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
demand for transportation and freight
movement in the country. The number of
wagons has increased at an average of
only 5 percent in the last three years. Further,
there has been no significant addition
to the locomotives over the years. Poor
maintenance of the rolling stock increases
the transit time for the customers. Due to
lack of investment in the rolling stock, there
is negligible diversification by the Railways
in commodities being catered for.
6.1.3 Lack of Integrated Connectivity
(First Mile and Last Mile)
In transportation, first and last-mile
connectivity refer to the end segments
of a transit journey, connecting the origin
and destination points to the transit
network stations. In the absence of
integrated first and last-mile connectivity,
Logistics cost as a Percentage of Revenue
25%
20%
15%
10%
5%
0%
3%
Automotive
& Auto

Component
8%
FMCG
5%
Textile
20%
Cement
3%
Pharmaceutical
Source: India Logistics and Warehousing, Knight Frank India
the dependence on railway freight
movement is gradually reducing. The
increase in transit time, multiple handling,
and inventory holding cost are some of
the challenges faced by shippers due to
the lack of end-to-end connectivity in
rail.
Based on a study, the logistics cost as a
percentage of the revenue varies from 3
percent to 20 percent, depending on the
industry’s characteristics. Each industry
has its challenges, such as the automobile
industry has high inventory carrying cost,
and timely supply to the end consumer is
crucial. In FMCG, the last mile connectivity
is of utmost importance, and in cement,
the logistics cost forms a significant part
of the total cost. Hence, it is sensitive to
any changes in the cost structure.
High Cost: The issue of lack of connectivity
between modes (rail and road) is a
significant challenge faced by customers
of Indian Railways. The existing logistics
parks and good sheds are located away
from the nearest railway stations making
interchange between rail and road a
costly and time-consuming process.
Even for several bulk commodities that
are moved by rail, last-mile connectivity 87
75 India Logistics & Warehousing. Knight Frank India. 2014.
Challenges and Reforms
It gives rise to operational inefficiencies
in the system, which increases the time
and cost of transportation. The last mile is
particularly critical because it influences
various things such as customer
satisfaction, delivery time, and cost. This
leg of the logistics chain is dependent on
the efficiency of the 3PL companies and
the infrastructure for storage facilities.
6.2 Roadmap for Reforms
Freight transportation in India is over-
dependent on roads. Though the country’s
rail freight costs INR 2 per ton-km less than
the road, the cost difference is not big
enough for shippers to switch to rail. While
in the US, which has a well-developed rail
system and competes closely with the road,
the freight cost is around INR 15 per ton-
km cheaper in rail than the road. In recent
times, Indian Railways has undertaken
several measures, such as special wagon
schemes, commodity-specific operator
schemes, terminal-related policies, etc.,
to cater to the customers’ specific needs;
and make rail an equally important mode
for freight movement.
75
The private sector
can play an important role in enhancing
operational efficiency and strengthening
the rail infrastructure through Public-
Private Partnerships (PPPs). Operational
efficiency for loading/unloading,
warehousing management, station
services, and automation and digitization
of various processes could be outsourced
to the private sector. Similarly, for first
occurs through the road network. Hence,
the total logistic cost involved in rail freight
transportation increases in the absence of
integrated connectivity.
Multiple handling: Lack of first and
last-mile in railways leads to multiple
handling of goods, because of which the
risk of damage to goods is also high. In
the case of high-value goods such as
automobiles, the customer's tolerance
to damage is extremely low, and in some
cases, customers’ can switch to different
brands. Hence, the condition in which
vehicles reach the customer is of utmost
importance to the OEMs.
Lack of inter-modal infrastructure: Well-
equipped inter-modal infrastructure such
as logistics parks, good sheds, and private
freight terminals is important for freight
aggregation and disaggregation. Lack
of all-weather storage is impacting the
freight loading potential of Indian Railways.
For example, in the cement sector, the
unavailability of terminal handling sites
for bulk material at appropriate locations
is a constraint for transporting via rail. In
the food grains sector, lack of integrated
warehouse for storage of grains with
proper facilities and amenities hampers
movement by rail.
Small and Fragmented Logistics
Companies: The majority of the truck
operating companies in India are small
private players, making it difficult for them
to get direct contracts from the shippers. 88IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
76 Dedicated Freight Corridor Corporation of India Limited. DFCCIL. 2021. https://dfccil.com/Home/DynemicPages?MenuId=75
77 India Logistics & Warehousing. Knight Frank India. 2014.
78 Faster speed, lower cost: How dedicated freight corridor will benefit Indian railways. NDTV.com. 2020. https://www.ndtv.
com/business/faster-speed-lower-cost-how-dedicated-freight-corridor-will-benefit-indian-railways-2343987
79 Railways Industry Research Report. IBEF. 2018. https://www.ibef.org/download/railways-nov-2018.pdf
80 The railways’ dedicated freight corridors: Thrice as fast, twice the load. India Today.2020. https://www.indiatoday.in/india-
today-insight/story/the-railways-dedicated-freight-corridors-thrice-as-fast-twice-the-load-1754917-2020-12-31
81 Addressing India’s high logistics costs. The Hindu Business Line. 2017. https://www.thehindubusinessline.com/opinion/
addressing-indias-high-logistics-costs/article9732208.ece
and last-mile connectivity, a separate
entity can be created by the railways
in partnership with the private sector
(detailed in table 6.2.1) as a single point of
contact for customers’ to handle multiple
legs of movement and ensure smooth
transportation of goods.
The upcoming Dedicated Freight Corridors
along the country’s eastern and western
corridors and multimodal logistics parks
will ease the oversaturated line capacity
constraints and improve the timing of
trains. Dedicated Freight Corridor (DFC)
is a 3,300 km long corridor, constituting
the Eastern Corridor and the Western
Corridor. The Eastern Corridor, which starts
from Ludhiana in Punjab, will pass through
Punjab, Haryana, Uttar Pradesh, Bihar, and
Jharkhand and terminate at Dankuni in West
Bengal, covering a distance of 1,856 km. The
EDFC is projected to cater to several traffic
sectors, including coal from the eastern
coalfields, steel, food grains, cement,
fertilizers, limestone, and general goods. On
the other hand, the Western Corridor will
cross the distance from Dadri to Mumbai,
passing through Haryana, Rajasthan,
Gujarat, and Maharashtra, covering a
distance of 1,504 km.
76
The Western Corridor
traffic mainly comprises container traffic,
petroleum products, fertilizers, food grains,
salt, coal, iron & steel, and cement.
Based on the enormous investments in
DFC, freight traffic is estimated to increase
significantly after its completion. The
average speed of freight trains will increase
from 25 kmph to 70 kmph and allow heavy-
haul trains with a carrying capacity of 13,000
tonnes. With improved carrying capacity
and the higher speed of trains on the DFC,
the transportation time will reduce by 80
percent.
77
Running of double-stack trains
will also be facilitated on the corridor.
78
DFCs
will strengthen the manufacturing sector
and spur the development of the country’s
logistics and warehousing segment.
Though the project received approval from
the Union Cabinet in 2006, the corridor’s
growth has been prolonged, due to which
the targeted completion of the project has
missed several deadlines. The projected
increase in freight after the completion of
DFC was 182 million tonnes in FY21 from 140
million tonnes in FY17, at a growth rate of 5.2
percent. The container traffic was expected
to reach 5.3 million TEUs from 3.8 million TEUs
in FY17.
79
The targets couldn’t be achieved
due to several reasons like procedural
delays, land acquisition, environment
clearances, and other related issues.
Timely completion of DFC is vital to the
Indian Railways as the rail freight has
increased, but the carrying capacity has
not seen a corresponding increase. The 89
82 Dedicated freight corridors: Transformation of Indian railways. 2021. https://ukdiss.com/examples/dedicated-freight-
corridors-indian-railways.php
83 Developing Multimodal Logistics Parks in India. Asian Development Bank. 2020; Surat, Nagpur, Chennai, Mumbai to have
multi-modal logistics hubs; land a key challenge. cnbctv18.com. 2020. https://www.cnbctv18.com/real-estate/surat-
nagpur-chennai-mumbai-to-have-multi-modal-logistics-hubs-land-a-key-challenge-6BZ937081.htm
Challenges and Reforms
Golden Quadrilateral corridor connecting
the four major Indian cities - Delhi,
Kolkata, Mumbai, and Chennai, is highly
congested, accounting for only 16 percent
of the total rail length but carries 58
percent freight and 52 passenger traffic.
80

The DFC could bring a massive change in
India’s freight transportation, particularly
in its hinterland, and significantly
boost several industries. It will facilitate
railways to better serve the customers
by providing reliable freight service at
reduced cost and time. For instance,
a container train moving from Delhi to
Mumbai on DFC would cover 1400 km in
one day.
81
Successful implementation
of the DFC program will put India on the
global spectrum as one of the world’s
largest heavy-haul freight operators by
using the advanced technologies and
approaches which can be extended to
other freight corridors.
82
Though DFC will be an essential link in
the entire multimodal transport chain,
the nodes where this rail link ends and
connects to infrastructures, such as
ICDs, ports, logistics parks, etc., are
equally crucial for improving rail freight.
Multi-Modal Logistics Parks (MMLPs)
development at strategic locations is
envisaged as a critical policy measure
to rationalize logistics costs in India and
enhance its competitiveness. MMLPs can
serve various purposes such as freight
aggregation and distribution, multimodal
freight transport, integrated storage and
warehousing, information technology
support, and value-added services. It is
estimated that logistics parks would lower
the transportation cost for the major links
by 10% by enabling freight movement on
higher sized trucks and rail. These parks
are proposed to be set on Public-Private
Partnership mode, wherein the land will
be acquired by the government and
warehousing units will be developed by
the private players. The Dedicated Freight
Corridor Corporation of India (DFCCIL)
proposes to provide rail connectivity to
the logistics parks for which the private
players would create the infrastructure.
Logistics Parks are proposed to be set at
areas with an adequate concentration
of diverse industries and serve as
significant production/ consumption
centres. Several multimodal connectivity
hubs are planned to be developed at the
country’s critical economic centres, such
as Mumbai, Chennai, Hyderabad, Surat,
Nagpur, and Assam. The development
of MMLPs is dependent on the efficiency
of the nodal agency and the third-party
players.
83
Indian Railways needs to put a perspective
plan for improving infrastructure backed
by adequate policy tools and encourage
private participation in the operation and
management of terminals, containers,
and warehouses to efficiently utilize the
resources. 90IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Improving Operational Efficiency:
Operational efficiency can be improved
by facilitating improvement in loading
and unloading operations such as loading
through low capacity rakes (mini rakes),
assurance of transit time, allowing round
the clock loading/unloading operations,
keep a check on rake detention, and
unloading operations at the terminals/
good sheds with adequate handling
capacity in partnership with the private
sector. Railway authorities to allow more
time to load/unload goods mostly during
the peak season and phased reduction of
demurrage and wharfage charges should
also be considered particularly when the
delay can be attributed to the railway
operations. Providing a timely response
to customers’ requests and queries is
essential to improve customer satisfaction.
Railways initiative to launch online portal
and a single window concept for this
purpose has been greatly appreciated by
the customers, and more can be achieved
through partnership with private operators
to improve operational efficiency.
Enhancing Infrastructural Development:
Indian Railways is working to overcome
the challenges of saturated infrastructural
capacity to enhance the modal share in
freight. In addition to the mega projects
such as the DFC, investment on upgrading
basic terminal infrastructure and rolling
stock will ensure an increase in the rail
freight volume, some of which can be
explored through partnership with private
sector. In order to increase the loading of
existing/bulk commodities and diversify
its freight basket, Indian Railways should
focus on facilitating movement by rail by
providing rakes with sufficient volumes to
justify trainload operations, investment in
special equipment, initiatives to capture
short-distance cargo and provide suitable
rail-connected terminal facilities. Providing
basic loading / unloading infrastructure
like movable ramps, trailers, proper lighting
for night time unloading, uniform flooring,
service facilities for safety of goods.
Rolling stock customization, especially for
industries like auto, is a key step towards
bringing the automobile load on Indian
Railways. For Railways to compete with
other transportation modes, there is an
urgent need to upgrade and expand the
railway infrastructure. It is thus important
to engage the private sector to bring more
funds and efficiency, thereby enhancing
railway infrastructure.
Strengthening First and last-mile
Connectivity: An integrated logistics
structure, such as well-linked railway
stations with first and last-mile
connectivity, is the need of the hour.
For example, in the cement industry,
the first and last-mile costs account for
10 percent of the total logistics cost in
rail transportation. To address the first
and last-mile challenge, railways can
create a separate entity in partnership
with the private sector for integrated
transportation of goods and ensure that
the customers deal with a single entity
for handling multiple legs of movement
of goods. The entity would tie-up with
transporters and freight forwarders for
end-to-end goods movement. The last-
mile connectivity and warehouse location 91
Challenges and Reforms
are essential for a shipper in determining
and minimizing transportation costs. For
instance, the Wagholi area in Pune district
is located almost 16-18 km from the Pune
railway station and 12-16 km from the city’s
prominent retail destinations. The travel
time taken for the last mile distribution to
the various parts of the city is less than
an hour’s drive from Wagholi, thereby
increasing its attractiveness. Additionally,
the connectivity with the major industrial
hubs, such as Sanaswadi, Ranjangaon,
and Chakan, is remarkably well from this
cluster. An integrated logistics segment
as part of the Indian Railways has long
been awaited by many industries. While in
the US and European rail freight segments
expanded from being only operation-
focused logistics providers to supply chain
managers in the 1970s, the Indian railways
has not diversified its operations. The table
below lists in detail the overall challenges
and actionable recommendations based
on suggestions made by the stakeholders.
6.2.1 Overall Recommendations to Increase Share of Rail in Domestic Freight
ChallengeRecommendation
Operational
Inefficiency
Low Capacity
Utilisation of
Cargo Wagons in
Passenger Trains
Proposing an Uber-like model for Cargo Wagons in
Passenger Trains
There are two cargo wagons in each passenger train.
Currently, as per estimates 80 percent of the cargo wagons
remain unutilized
By proposing an Uber-like model for one of the two cargo
wagons, the customers can book the wagon using an online
application. It can be one way to directly increase the freight
traffic - without any additional investment in infrastructure.
Indian Railways may keep operating the other cargo
wagon, the way it is done currently, until the success of the
proposed model is established
Lack of Assured
Transit Time
Partnering with Private Sector in Loading/Unloading, Warehouse
Management, Station Operations and Digitization of Cargo
Booking and Tracking System to Ensure a Faster Turnaround Time
Allow round the clock unloading to improve wagon
turnaround. Ensure staff availability to handle traffic at good
sheds and terminals
Strict adherence to time-table that is also crucial to sustaining
customers’ confidence
A check on the detention of trains should be exercised
regularly to improve the speed of trains 92IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Multi-point
Unloading
and Demand
Aggregation
Issue
Allow multi-point unloading of BCACBM rakes and greater
availability of mini rakes and two-point rakes
In the automobile sector, the Railway Board has approved
multipoint unloading allowing automobile traffic to be
unloaded in NMG, BCCNR, BCACM or any other similar type
of wagon other than BCACBM rakes. Multi-point unloading
should be allowed for the BCACBM rakes
Increased availability of mini rakes and two-point rakes for the
transit of goods based on customers’ needs
Huge Cost
Difference
Between
Movement by
Road and Rail
Introducing More Dynamic Discount Schemes for Rail Freight
Movement
In order to compete effectively with the road sector, Indian
Railways needs to introduce dynamic discount schemes to
attract traffic.
Discount schemes for shorter distance closed circuit routes.
For example, as gathered from stakeholder discussions, Indian
Railways has offered a 50 percent discount on closed-circuit
movement of container trains from JNPT to CFS in Mumbai,
barely 100 km distance between the origin and destination. For
this route, the cost per container (TEU) is approximately INR 2500
(INR 0.1 per kg) by rail and INR 4500 via road (INR 0.18 per kg)
Discount Scheme for non-peak season, when demand falls
during monsoon; on return trips to minimize the movement of
empty trains in the return journey; and loyalty programs offering
discount on consistent freight movement by rail
Uncertainty in
Rake Supply
Close Coordination with Industry Players for Demand-Supply
Based Rake Planning and Allocation
The timely availability of wagons is essential for smooth
operations. The peak and lean periods of different industries
must be considered before planning rake allocation.
Meetings and discussions with industry players to understand
the needs of the customers’ will help in better planning and
allocation of rakes
Modifying the AFTO policy for the Automobile sector to allow
multiple empty routes in a closed-circuit route. It will increase
rake utilization rate and reduce operation cost
Keep a check on the wagon maintenance time for increase
in the utilisation rate. This can be achieved by increasing the
validity of brake power certificate 93
Challenges and Reforms
Slow Response
Mechanism
Fast Track Approval Process
The design approval process by RDSO takes time depending
upon the complexity of the design. This process needs to be
fast-tracked.
Fast and quick response to requests on use of terminals, land
lease, etc. will improve customer satisfaction
High
Maintenance
Time of Rakes
Allowing increased validity of Brake Power Certificate
There is a need to automate the inspection and maintenance
process, which has largely been manual. In addition to investing
in rolling stock, Indian Railways should focus on its efficient
maintenance for faster turnaround time and timely supply of
rakes. Accessing the technical feasibility to increase the validity
of the brake power certificate can reduce the maintenance
time and improve the availability of rolling stock without any
additional investment.
According to the current policy of Closed Circuit Examination, for
BCACBM rake, the Brake Power Certificate for the rakes has to
be obtained after every 7,500 km or within 30 days, after a rake
leaves the base location. After the completion of the specified
distance or time (whichever happens earlier), the time taken for
maintenance of the rakes by the Indian Railways is very high,
thereby reducing the rake utilisation rate
In order to increase the rake utilisation rate, railways can assess
the technical feasibility to increase the validity of the brake
power certificate to 10,000 km or 60 days. It will increase the rake
utilisation rate by a significant percent and reduce the cost of
transportation of goods.
Lack of Adequate
Investment in
Marketing
Involvement of Private Sector in Operation, Infrastructure and
Marketing
Indian Railways should work with the private sector to develop
an effective marketing strategy for freight discount schemes,
value-added services offered by railways, and use of innovative
digital solutions to improve information for the end customers, all
towards enhancing freight volume
Slow Speed of
Freight Trains
Maintaining the Speed of Freight Trains attained during the
Covid-19 crisis
Freight trains speed in India stood at 23.6 kmph in 2019, however,
in 2020, it rose to 42.9 kmph. Higher speed of freight trains
resulted in increased loading of goods. 94IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Suboptimal
Infrastructure
Sub-optimal
Design of
Wagons
Introducing Commodity Specific Wagon Designs through Close
Co-operation between RDSO and Private Sector
Induction of commodity-specific wagons will help to increase
the freight volume, for example:
o Side-loading of two-wheelers in BCACBM rakes for faster
loading and unloading of two-wheelers. This will increase
freight volume from the two-wheeler segment.
o Modify the design of BCACBM rakes to allow double
stacking of SUVs in automobile sector
Inadequate
Terminal
Infrastructure
Partnership with Private sector for Development of Terminal
Infrastructure
Development of terminal infrastructure such as upgradation
of approach roads to terminals for smooth loading and
unloading of goods by entering into a joint venture (JV) with
state governments and round the clock electricity supply for
uninterrupted loading and unloading operations
o For example: There is a lack of bulk cement infrastructure
for movement by rail. Railways can tap into the growing
bulk cement market by investing in terminal infrastructure
for bulk cement handling with private sector participation
Increased mechanization to improve labour efficiency, such as
carts and forklift trucks to unload cargo.
Fencing and cameras at the terminals and warehouses for
better safety and security
Lack of
Intermodal
infrastructure
Partnership with Private Sector for Development of
Warehouses, Good Sheds, and Multimodal Logistics Parks
Increased investment on packaging and warehousing facilities
Development of all-weather storage facilities to avoid damage
to goods. Upgradation of Good Sheds by improving basic
infrastructure.
Development of multimodal logistics parks will facilitate smooth
transition of freight across transportation modes
Delays in
targeted
completion of
DFC, a flagship
project for freight
movement
Timely Completion of DFC
The commencement of DFC’s operations have missed multiple
targets. A timely completion of the project is crucial to ease the
congestion and expand rail freight operation. DFCCIL should
focus on completing limited operations in a phased manner. 95
Challenges and Reforms
Overutilization of
Line Capacity Segregation of Freight and Passenger Traffic
Segregation of freight and passenger traffic will enable better
planning and optimum utilisation of the network, resulting in
faster movement of goods. For example:
o DFCs are expected to ease the congestion on the major
terminals and improve freight traffic.
Small Share
of Non-Bulk
Commodities
Parcel Shipments and Use of Dwarf Containers
With increase in e-commerce, India’s market for small volume
shipments is growing at a significant rate. Assurance of
timely delivery and low volume consignments are the key
characteristics of parcel shipments. There is an increased
opportunity for Indian Railways in this segment with
consolidation with the private sector
Greater use of dwarf containers especially for commodities
with high price elasticity. For example, FMCG, pharmaceuticals,
machinery parts and fruits and vegetables can be targeted to be
transported in dwarf containers in the short term
Lack of
Integrated
Connectivity
(First and Last
Mile)
Issue of Multiple
Handling Increased Availability of RoRo Rakes
Suitable design of wagons for the roll-on-roll off rakes such that
the loaded trucks can be loaded on flat wagons and then loaded
off on roads easily. This will help in solving the issue of first and
last-mile connectivity and will eliminate multiple handling.
Railways and RDSO could jointly work with Commercial
Vehicle Manufacturers to check the feasibility of this option for
commodity specific rakes 96IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Additional Cost
due to Lack
of Intermodal
Infrastructure
Multi Modal Logistics Parks at Strategic Locations, through
Partnership with Private Sector
Consolidation of wagonload and piecemeal commodities on
Indian Railways through freight aggregation at goods sheds.
Provision of seamless connectivity will reduce the risk of damage
and save additional cost
o For example: Railways can tap into smaller volume cement
players through appropriate aggregation models such that
the demand of the small players destined to a common
location can be aggregated at a good shed located at a
location convenient for all parties.
MMLPs can provide multi-modal freight handling facility
comprising mechanized warehouses, specialized storage
solutions like cold storage, facilities for mechanized material
handling and inter-modal transfers like container terminals, bulk
or break-bulk cargo terminals which will lower cost
First and last-
mile Connectivity
Creating a Special Entity Under Railways for Handling
Intermodal Logistics in Partnership with the Private Sector to
Address First and Last-mile Issue
Create a network of
freight forwarders,
transporters and
agents to ensure
smooth movement
of cargo through
multiple modes
Partner with
private players to
enhance the service
efficiency with
regards to customer
satisfaction and
cargo handling
operations
Functions as a
single window for
customers vis-à-vis
cargo movement
and payment
transactions
Offer first and last
mile services to the
customers to move the
cargo from customer
location to railway
warehouse and
vice-versa
Separate
Entity for
Logistics 97
Challenges and Reforms
ChallengeRecommendation
Stakeholder
Responsible
Actionable In
Short
Term
Medium
Term
Long
Term
Operational
Inefficiency
Proposing an Uber-like model for
Cargo Wagons in Passenger Trains
Indian Railways
and Private
Sector
Partnering with Private Sector in
Loading/Unloading, Warehouse
Management, Station Operations and
Digitization of Cargo Booking and
Tracking System to Ensure a Faster
Turnaround Time
Indian Railways
and Private
Sector
Allow multi-point unloading
of BCACBM rakes and greater
availability of mini rakes and two-
point rakes
Indian Railways
Introducing More Dynamic Discount
Schemes for Rail Freight Movement
Indian Railways
Close Coordination with Industry
Players for Demand-Supply Based
Rake Planning and Allocation
Indian Railways
and Industry
Players
Fast Track Approval Process
Indian Railways
and RDSO
Allowing increased validity of Brake
Power Certificate
Indian Railways
Involvement of Private Sector
in Operation, Infrastructure and
Marketing
Indian Railways
and Private
Players
Maintaining the Speed of Freight
Trains attained during the Covid-19
crisis
Indian Railways 98IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Sub-optimal
Infrastructure
Introducing Commodity Specific
Wagon Designs through Close
Co-operation between RDSO and
Private Sector
Indian
Railways, RDSO
and Private
Sector
Partnership with Private sector
for Development of Terminal
Infrastructure
Indian Railways
and Private
Sector
Partnership with Private Sector for
Development of Warehouses, Good
Sheds, and Multimodal Logistics Parks
Indian Railways
and Private
Sector
Timely Completion of DFC
Indian Railways
and DFCCIL
Segregation of Freight and Passenger
Traffic
Indian Railways
Parcel Shipments and Use of Dwarf
Containers to Improve Share of Non-
Bulk Commodities
Indian Railways
and Private
Sector
Lack of
Integrated
Connectivity
(First and Last
Mile)
Increased availability of RoRo rakes
Indian Railways
and RDSO
Multi Modal Logistics Parks at
Strategic Locations, through
Partnership with Private Sector
Indian Railways
and Private
Sector
Creating a Special Entity Under
Railways for Handling Intermodal
Logistics in Partnership with the
Private Sector to Address First and
Last-mile Issue
Indian Railways
and Private
Sector 99
6.2.2 Sector Specific Reforms
In the following section sector specific
reforms are detailed again based on the
case studies in Chapter 5. Despite a rise
in automobile transportation by rail in
the last few years, the share of railways in
automobile movement is significantly low.
In the passenger vehicle segment, almost
95 percent of the transportation occurs
via roads using trucks and trailers. For the
logistics intensive cement industry, the rail
6.2.2.1 Automobile: Recommendations to Increase Share of Rail in Domestic
Automobile Movement
coefficient has declined from 43 percent in
2013-14 to 35 percent in 2018-19. Similarly,
the foodgrain sector has witnessed
a decrease in rail share movement.
Building infrastructure such as terminal
and warehouses, improving connectivity,
smooth loading and unloading, reduced
transit time and higher speed of train
along with private sector partnership can
increase rail freight volume.
ChallengeRecommendationActionable
Infrastructure
Support
Connectivity
In passenger vehicle
segment design
of BCACBM rakes
doesn’t allow the
loading of SUVs in
both decks.
In the two-wheeler
segment, side
loading of vehicles
in BCACBM rakes is
not possible. Two-
wheelers have to be
driven from one end
to the other.
A BCACBM rake can
carry about 3000
two-wheelers.
Demand for Sports Utility Vehicles (SUVs)
is growing, and its share is expected to
increase. Railways can tap this traffic by
upgrading wagon height to taller wagons to
allow double stacking of SUVs.
The two-wheeler segment constitutes 80
percent of the automobile industry. More than
90 percent of the two-wheeler movement
is by road. There is huge potential in this
segment to shift the freight traffic to rail.
Some of the suggestion by industry players
include:
Allow sideloading of two-wheelers in
the BCACBM rakes for faster loading/
unloading
Medium to
Long Term 100IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Multiple
Handling and
First Mile
The first mile by
railways involves
multiple handling, cost,
and time. It takes 2-3
days from aggregating
demand to moving
cars in trucks to the
nearest railway station
Sidings in automobile plants will avoid
multiple handling and first-mile problem.
Efforts are needed to identify specific
locations of automobile plants where
railway sidings could be put in place, and
having sidings inside automobile plants
will avoid both multiple handling and first
mile issues.
The industry has suggested the option to
transport trailers, loaded with vehicles,
through Railways. RDSO could jointly work
with Commercial Vehicle Manufacturers
to check if it is feasible to develop trailers,
which can be coupled to the Tractor and
the Railways for interchanging from road
to rail and vice-versa
Medium to
Long Term
Terminal
Infrastructure
and Auto Hubs
Lack of basic terminal
infrastructure and
security at Auto-Hubs.
The slow process of
getting approvals for
upgrading Private
Freight Terminals
Upgradation of terminal and siding
infrastructure and Auto Hubs with loading/
unloading infrastructure like movable
ramps, trailers, all-time electricity, uniform
flooring of approach roads, service
facilities for the safety of vehicles, and
dust-free parking space.
All of this can be attained Public Private
Partnership
Short to
Medium
Term
Rake
unavailability
and lack of
maintenance
Rake unavailability,
poor maintenance,
and low quality of
rakes discourage the
customers to use rail
Ensure good quality rake provision to the auto
companies. Frequent quality checks to ensure
the safety of vehicles during transit via rail
Short to
Medium
Term
Operational
Lack of
Assurance in
Transit Times
Lack of Assurance in
Transit Time makes
it difficult for OEMs/
logistic companies to
ensure timely delivery
of vehicles to dealers/
consumers
Preparing realistic timetables and adherence
to the schedules is essential to sustain
the confidence. Improvement in Assured
Transit Time during the Covid-19 pandemic
has strengthened the confidence of Auto
companies in Railways
Short to
Medium
Term 101
Challenges and Reforms
Freight
Rationalisation
Rail is not
economically viable
and competitive to
the road for shorter
distances
To make railways competitive to the road for
distances less than 1,000 km - railways should
consider reducing freight rates of NMG and
BCACBM rakes
Short to
Medium
Term
Demand
Aggregation
and Stabling
charges
Cumulating bulk
demand for the
BCACBM rakes is
challenging for
companies. A penalty
in the form of stabling
charges is levied if
loading/unloading
exceeds 8 hours’ time
limit
Indian railways should consider increasing
the loading/unloading time limit at the
stations from 8 hours. The time limit should
be based on the total number of cars at the
station or should vary from lean demand and
peak demand period
Short to
Medium
Term
Response to
requests and
queries
Delayed response
to the requests,
complaints, and
queries of Auto
companies
Fast and quick response to customers’
requests on use of terminals, land lease, etc.
Companies appreciate railways initiative to
launch online portal and a single window
concept for this purpose
Short Term
Policy Related
AFTO policy
The uptake of AFTO
policy is slower
than expected.
Several factors
like the insufficient
number of rakes,
high lead time of
indent placement
to rake availability
discourage OEMs
and 3PL to use rail.
Multi point
unloading is
permitted for rakes
NMG, BCCNR, and
BCACM
The AFTO policy has been appreciated by
industry players. However, the suboptimal
infrastructure and challenges by rail have
resulted in low uptake of the policy. The fees
for the AFTO policy can be revised further,
as in addition to the fees (INR 3 crores), the
companies have to invest in the rakes (INR 15
crores). A further revision in the AFTO fees by
IR will help in attracting more companies to
join the scheme.
Allow multi-point unloading of BCACBM rakes
Short to
Medium
Term
Slow approval
process
The design approval
process by RDSO takes
1-3 years, depending
upon the complexity
of design and RDSO’s
capacity.
The rolling stock design and approval process
should be simplified, and the process to get
approvals for designs and implementation of
wagons should also be relaxed by the RDSO
Medium
Term 102IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Exports
Infrastructure
development for
exports to neighboring
countries
Development of infrastructures such as
more loading terminals across the country
facilitating auto exports via rail to neighboring
countries such as Nepal, Bangladesh, and
Sri Lanka. For example, Railways loaded 87
Mahindra Bolero pick-up vans from Navi
Mumbai in Maharashtra and transported to
Benapole in Bangladesh in October 2020.
84
Medium
Term
Source: Direct intreraction with stakeholders
84 Mahindra exports Bolero pickups to Bangladesh on Indian Railways network. 2020. https://www.autocarpro.in/news-
national/mahindra-exports-bolero-pickups-to-bangladesh-on-indian-railways-network-77558
6.2.2.2 Cement: Challenges and Recommendations to Increase Share of Rail
in Domestic Cement Movement
ChallengeRecommendationActionable
Infrastructure
Support
Design of Rakes
Aggregation of
demand to load a
BCNHL rake of 4,000
tons of capacity
is challenging
during the lean
season. Loading
in these rakes
using the available
mechanization is
also difficult as the
height of the door is
less than the wagon
height
Allow mini rakes (with a capacity of ~2000
tons) and two-point rakes for the transit of
smaller volumes to better serve the market
throughout the year (based on industry
demand). To increase rake utilization,
allow multiple companies with a common
destination to fill the rake load jointly. Loading
is efficient if the mechanization is compatible
with the wagon design
Short to
Medium
term
Terminal
Sidings and
Good Sheds
Lack of basic
infrastructure at
terminal sidings and
Good Sheds
Investment in basic infrastructure at the
terminal sidings and Good Sheds. Electricity
and lighting for night time unloading and
operate machinery, uniform approach roads
to the terminals allowing higher capacity
trucks to enter the terminal, availability
of labour for night time unloading, clean
platforms, and sanitation facility for the
labour. Safety and security of storage of
goods by installing cameras and deploying
staff to look after the goods
Medium to
Long term 103
Challenges and Reforms
Rake
Unavailability
Rake unavailability
especially during
peak season, impacts
delivery time. The
time between rake
indent and availability
varies from 3-4 days
compared to less
than one day for the
road
Low supply of wagons and uncertainty
for cement and clinker movement is one
of the reasons causing a shift by industry
players from rail to road. Improving rake
availability based on industry demand,
conducting industry dialogue during wagon
planning stage, preparing a futuristic plan for
transparent allocation of rakes (considering
peak and lean season of the industry) will
help in increasing cement freight
Short to
Medium
term
Bulk loading
Lack of bulk cement
infrastructure for
movement by rail. At
present bulk cement
is around 5% of the
total cement industry
Railways offer various advantages for bulk
cement movement - such as reduction in
loss of cement, no seepage due to multiple
handling or bag bursts. Bulk wagons can
carry more cement. Railways can tap into the
growing bulk cement market by investing in
infrastructure (terminals and Good Sheds) for
bulk cement handling
Medium to
long term
Operational
Round the clock
unloading
Round the clock
unloading is not
permitted across all
terminals
Allow round the clock unloading to improve
wagon turnaround. Ensure staff availability to
handle traffic at Good Sheds and terminals.
Short term
Demurrage
and Wharfage
Charges
Delay in unloading
leads to penalties
in the form of
demurrage and
wharfage charges
Operational efficiency can be improved
by considering a phased reduction of
demurrage and wharfage charges, especially
when the delay can be attributed to the
railway operations
Medium
term
Lack of
Mechanization
and Labour
Unions
Loading and
Unloading of cement
bags is a labour
intensive and
manual process.
Non-mechanized
unloading and the
presence of labour
unions increases cost
and operating time
for the industry
Mechanization of unloading process and
non-unionized labour can improve the
efficiency and productivity of labour. Use of
carts and forklift trucks to unload the goods
will help in faster unloading
Medium to
Long term 104IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Detention of
Rakes
Detention of rakes at
terminals increases
transit time and
congestion at
terminals. Blockage
of working capital of
cement companies
due to uncertainty
in rake movement.
Operations of
companies are
affected when the
movement of raw
materials stops due to
rake detention
A regular check on the detention of trains
outside signals or at stations adjacent to
Goods Terminals, in shunting operations at
roadside stations and enroute detentions
Short to
Medium
term
First and
Last Mile
Connectivity
Unorganized first and
last mile services add
up to the time and
cost. Handling and
last-mile services
provided by small
and unorganized
players often results
in inadequate
manpower
deployment and
mechanization for
goods handling
Handling and last-mile problem can be
addressed if Railways focuses on establishing
a separate transportation unit for handling
and the connectivity services.
An increase in cement and clinker production
will increase rail freight movement.
85

Connecting cement clinkerization units to the
railways will help in addressing the first-mile
issue by rail.
Medium to
Long term
Policy Related
LTTC Policy
Strict eligibility criteria
of 1 million tons of
production for the
LTTC contract is
challenging for small
and mid-sized firms
Reducing the eligibility criteria for LTTC
contract will help attract more cement
firms (including small and mid-sized).
For example, a reduction in AFTO scheme
fees from INR 5 cr to INR 3 cr helped in a
small uptake in the number of participants
from the Auto sector. The number of
participants increased from 2 to 6 after the
reduction in fees and other amendments
in the policy
Short to
Medium
term
Source: Direct interaction with stakeholders
85 B., Saurabh. B., Palash. Gupta, D.B. Factors impacting railway freight traffic in India. 2016. https://www.ncaer.org/
publication_details.php?pID=264&pID=264 105
Challenges and Reforms
6.2.2.3 Foodgrains: Challenges and Recommendations to Increase Share
of Rail in Domestic Foodgrains Movement
ChallengeRecommendationActionable
Connectivity
Lack of access to reach
designated market/mandis,
storage and post-harvest
management
Indian Railways with public and
private partnership should provide
support to farmers to reach their
nearby markets. Since railways have
a higher penetration in rural areas,
however, connectivity between farmers
and organised mandis/market is an
issue. As per the National Farmers
Commission, the average distance
of the market should be within 5 km.
Introduction of mechanism wherein
intermodal connectivity can be used
for procurement of grains from the
rural parts of the country.
Remove information Asymmetry to
keep the price in check
Comprehensive agricultural logistic
– providing integrated post-
harvest management solution with
value-added services to fill in the
gaps
Short to
Medium
Term 106IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Infrastructure
Lack of infrastructure such
as warehouses and storage
facilities
Indian Railways has a vast network
and connects rural areas to urban
areas. With such connectivity, it is
the primary source for transportation
of foodgrains from farm-gate to
organised markets.
Development of an integrated
warehouse for storage of foodgrains
with proper facilities and amenities at
freight terminals is important.
There is an urgent need to build a
viable load for carrier or transport.
Aggregation centres are required
which will serve as a loading and
dispatch facility at village and
block level.
Dry goods storage system is
required for long term holding
crops. This can be achieved
through modernisation of existing
infrastructure and improved
inventory management
Medium
Term
Operational
Congested line capacity and,
terminal Infrastructure are not
developed to meet the growing
demand of the sector resulting
in delays in transit time and
increased wastage
Involvement of private players in an
increased movement of Kisan special
trains to transport perishable goods
for dedicated routes and seasonal
commodities
Increase wagon utilization level
by inducting commodity specific
wagons instead of a common pool
of wagons
Short to
Medium
Term
Source: Direct interactions with stakeholders 107
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operations
Indian railways takes several initiatives
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freight operations amid COVID-19
challenges. 2020. Zee News. https://
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indian-railways-takes-several-
initiatives-in-tariff-non-tariff-field-
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covid-19-challenges-2306001.html
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businesstoday.in/magazine/special-
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story/337229
Logistics. Cement Manufacturers
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org/key-areas/logistics/
Mahindra exports Bolero pickups
to Bangladesh on Indian Railways
network. 2020. https://www.
autocarpro.in/news-national/
mahindra-exports-bolero-pickups-
to-bangladesh-on-indian-railways-
network-77558
Mango Special to Banana Special:
Kisan Rail gets on track. The Indian
Express. 2020. https://indianexpress.
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give 25 % discount in haulage rate
on transport of empty containers
and empty flat wagons. Press
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gov.in/PressReleaseIframePage.
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Mukundan, Harish. A Comparative
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in India. Ministry of Food Processing
Industries, Government of India.
foodprocessingindia.gov.in
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Rail Freight Transport Market- Growth,
Trends, And Forecast (2020 - 2025).
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Railways emerges as the preferred
carrier of automobile in the country.
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Railways Industry Research Report. IBEF.
2018. https://www.ibef.org/download/
railways-nov-2018.pdf
Railways transports 6.75 lakh wagons
of commodities across country since
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Online News Paper Portal. Mysore news.
2020. https://citytoday.news/railways-
transports-6-75-lakh-wagons-of-
commodities-across-country-since-
march-23-officials/
Report of the Committee for Doubling
Farmers’ Income, Volume III - Post-
production Agri-logistics: maximising
gains for farmers. Department of
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Farmer’s Welfare. 2017. http://farmer.
gov.in/imagedefault/DFI/DFI%20
Volume%203.pdf
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Surat, Nagpur, Chennai, Mumbai to have
multi-modal logistics hubs; land a key
challenge. cnbctv18.com. 2020. https://
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nagpur-chennai-mumbai-to-have-
multi-modal-logistics-hubs-land-a-
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The Food Corporation of India is an
organization created and run by the
Government of India. It is a statutory
body under the Ministry of Consumer
Affairs, Food and Public Distribution,
Government of India, formed by the
enactment of Food Corporation Act
1964
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corridors-thrice-as-fast-twice-the-
load-1754917-2020-12-31
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fzAZ8hyYWauiQkWVOrMesI/When-it-
comes-to-moving-things-Indians-
just-hit-the-road.html 111
Annexures
Freight Volume Carried by India's Rail, Road and Air Transport (million tonne-km)
YearRoadRailAir
1998 430,778 284,270 531
1999 467,000 308,040 531
2000 494,000 312,400 548
2001 515,000 333,200 515
2002 545,000 353,200 546
2003 595,000 381,200 580
2004 643,000 411,300 708
2005 728,300 439,596 774
2006 825,900 480,993 843
2007 933,700 521,370 968
2008 1,021,600 551,448 1234
2009 1,144,500 600,546 1235
2010 1,287,300 625,723 1631
2011 1,407,800 667,607 1703
2012 1,508,000 649,645 1579
2013 1,653,600 665,810 1734
2014 1,824,300 681,696 1851
2015 2,026,100 654,481 1834
2016 2,226,570 620,175 1894
2017 2,435,870 654,285 2407
2018 2,222,106 692,916 2704
2019 2,357,775 738,523 1938
Source: OECD and World Bank Database
Annexure 112IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Container Port Traffic in India (TEU:20 foot
equivalent unit)
Year Container Port Traffic (TEU)
20002,450,656
20012,764,757
20023,208,380
20033,916,814
20044,332,863
20054,982,092
20066,141,148
20077,398,211
20087,672,457
20098,014,487
20108,889,576
20119,893,786
201210,041,000
201310,632,000
201411,319,000
201511,883,000
201612,083,010
201715,429,000
201816,946,200
201917,053,200
Source: World Bank Database
Freight Carried by Railways (million
tonne-km), 2019
Country
Freight Carried by Railways
(million tonne-km)
USA2,364,144
China2,882,100
Russia2,602,493
India738,523
Source: World Bank Database
Freight carried by Air-Transport (million
tonne-km) in 2019
Country
Freight Carried by Air
transport (million tonne-km)
USA42,498
China25,395
Russia6,621
India1,938
Source: World Bank Database
Container port traffic (million TEUs) in 2019
Country
Container port traffic
(million TEUs)
USA55
China242
Russia5
India17
Source: World Bank Database 113
Annexure
Container Port Traffic in India (TEU:20 foot
equivalent unit)
Year
Passenger
Earnings
(in crores)
Freight
Earnings
(in crores)
1950-51 98 139.3
1960-61 132 280.5
1970-71 296 600.7
1980-81 828 1,550.90
1990-91 3,145 8,247.00
2000-01 10,483 23,045.41
2008-09 21,866 51,749.34
2010-11 25,706 60,687.05
2011-12 28,246 67,743.62
2012-13 31,323 83,478.83
2013-14 36,532 91,570.85
2014-15 42,190 103,100.15
2015-16 44,283 106,940.55
2016-17 46,280 102,027.82
2017-18 48,643 113,523.53
Source: Indian Railways Yearbook
Line Capacity (units)
Year Route (Kms)
Running
Track
(Kms.)
1950-51 53,596 59,315
1960-61 56,247 63,602
1970-71 59,790 71,669
1980-81 61,240 75,860
1990-91 62,367 78,607
2000-01 63,028 81,865
2008-09 64,015 86,937
2010-11 64,173 87,114
2011-12 64,266 89,801
2012-13 65,080 89,236
2013-14 65,426 89,919
2014-15 65,600 90,803
2015-16 66,252 92,084
2016-17 66,918 93,902
2017-18 66,935 94,270
2018-19 67,415 95,981
Source: Indian Railways Yearbook 114IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Rolling Stock: Wagons (units)
YearWagons
1950-51205,596
1960-61307,907
1970-71 383,990
1980-81400,946
1990-91346,102
2000-01222,193
2008-09212,835
2010-11 229,997
2011-12239,321
2012-13244,818
2013-14252,833
2014-15254,018
2015-16251,295
2016-17 2,77,992
2017-18 2,79,308
2018-192,89,185
Source: Indian Railways Yearbook
Rolling Stocks: Locomotives (Units)
Year Locomotives (units)
Year Steam DieselElectric
1950-51 8,120 17 72
1960-61 10,312 181 131
1970-71 9,387 1,169 602
1980-81 7,469 2,403 1,036
1990-91 2,915 3,759 1,743
2000-01 54 4,702 2,810
2008-09 43 4,963 3,586
2010-11 43 5,137 4,033
2011-12 43 5,197 4,309
2012-13 43 5,345 4,568
2013-14 43 5,633 4,823
2014-15 43 5,714 5,016
2015-16 39 5,869 5,214
2016-17 39 6,023 5,399
2017-18 39 6,086 5,639
2018-19 39 6,049 6,059
Source: Indian Railways Yearbook 115
Annexure
Wagon Utilisation: Total carrying capacity (Million Tonnes)
Year Wagon Utilisation: Total Carrying Capacity (Million Tonnes)
2012-1313.4
2013-1414.1
2014-1514.3
2015-1614.4
2016-1716.0
2017-1816.3
2018-1917.0
Source: Indian Railways Yearbook
Average Rate Passenger and Freight and Fare to Freight Ratio
Year
Average rate per
passenger-km. (in Rs.)
Average rate per TKM
for Freight (in Rs.)
Passenger Rate to
Freight Rate Ratio
1950-511.483.160.46835443
1960-611.713.870.441860465
1970-712.55.430.460405157
1980-81 3.9710.50.378095238
1990-91 10.64350.304
2000-01 22.9473.780.31092437
2008-09 26.0993.840.278026428
2010-11 26.3096.990.271161975
2011-12 27.00101.470.266088499
2012-13 28.50128.500.221789883
2013-14 32.00137.530.232676507
2014-15 36.80151.240.243321873
2015-16 38.70163.400.236842105
2016-17 40.30164.510.244969911
2017-18 41.30163.830.252090582
2018-19 44.10166.000.265662651
Source: Indian Railways Yearbook 116IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Average Freight train speed (km/hr)
Year
Average Freight train
speed (km/hr)
1950-5117.4
1960-6116.1
1970-7117.9
1980-8119.7
1990-9122.7
2000-0124.1
2008-0925.7
2010-1125.6
2011-1225
2012-1325.5
2013-1425.9
2014-1523.8
2015-1623.4
2016-1723.7
2017-18 23.3
2018-1923.2
Source: Indian Railways Yearbook
Operating Ratio (%)
Year Operating Ratio (%)
1950-5181
1960-6178.75
1970-7184.13
1980-8196.07
1990-9191.97
2000-0198.34
2008-0990.46
2010-1194.59
2011-1294.85
2012-1390.19
2013-1493.6
2014-1591.3
2015-1690.5
2016-1796.5
2017-18 98.4
2018-1997.3
Source: Indian Railways Yearbook 117
Annexure
Passenger Traffic in Indian Railways
Year
No. of
passengers
originating (in
millions)
Passenger
kms. (in
millions)
2007-08 6,524 769,956
2008-09 6,920 838,032
2009-10 7,246 903,465
2010-11 7,651 9,78,508
2011-12 8,224 10,46,522
2012-13 8,421 10,98,103
Year
No. of
passengers
originating (in
millions)
Passenger
kms. (in
millions)
2013-14 8,397 11,40,412
2014-15 8,224 11,47,190
2015-16 8,107 11,43,039
2016-17 8,116 11,49,835
2017-18 8,286 11,77,699
2018-19 8,439 11,57,174
Source: Indian Railways Yearbook
Movement of bulk commodities by Indian Railways (Million Tonnes)
Commodity2011-122012-132013-142014-152015-162016-17
Coal 455.8 496.4 508.1 545.8 551.83532.83
Food grains 46.4 49.0 55.1 55.5 45.73 44.86
Iron & Steel 35.2 35.3 39.0 42.8 44.79 52.41
Iron ore 104.7 111.4124.3 112.8116.94137.55
Cement 107.7 105.9 109.8 109.8105.35103.29
POL (Mineral oils) 39.8 40.6 41.2 41.1 43.24 42.42
Fertilizers (Chemical manures) 52.7 46.2 44.7 47.4 52.23 48.34
Limestone and Dolomite 17.7 19.6 20.7 21.2 23.53 25.53
Stones (including gypsum )
other than marble
13.0 11.8 11.6 15.0 15.04 14.78
Salt 5.1 4.8 4.7 5.0 5.02 4.97
Sugar 4.6 3.0 3.0 2.7 3.39 2.35
Other Commodities86.55 84.1189.63 96.2 94.42 96.82
Grand Total 969 1008 1052 1095 1102 1106
Source: Indian Railways Yearbook 118IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Movement of bulk commodities by Indian Railways from 2011-12 to 2018-19 (%share)
Commodity 2011-122012-132013-142014-152015-162016-172017-182018-19
Coal 47% 49% 48% 50% 50% 48% 48% 50%
Foodgrains 5% 5% 5% 5% 4% 4% 4% 3%
Iron & Steel 4% 4% 4% 4% 4% 5% 5% 4%
Iron ore 11% 11% 12% 10% 11% 12% 12% 11%
Cement 11% 11% 10% 10% 10% 9% 10% 10%
POL (Mineral oils) 4% 4% 4% 4% 4% 4% 4% 4%
Fertilizers
(Chemical
manures)
5% 5% 4% 4% 5% 4% 4% 4%
Limestone and
Dolomite
2% 2% 2% 2% 2% 2% 2% 2%
Stones (including
gypsum) other
than marble
1% 1% 1% 1% 1% 1% 2% 2%
Salt 1% 0% 0% 0% 0% 0% 0% 0%
Sugar 0% 0% 0% 0% 0% 0% 0% 0%
Commodities
other than above
9% 8% 9% 9% 9% 9% 9% 9%
Grand Total 100% 100% 100% 100% 100% 100% 100% 100%
Source: Indian Railways Yearbook
Rail Coefficient: Major Commodities carried by the Indian Railways as a Percentage of
Total Production plus Imports
Year Coal Iron Ore Cement Foodgrains Fertilizers
POI
Products
2013-14 69 81 43 21 86 17
2014-15 66 80 40 22 85 17
2015-16 65 71 37 18 88 17
2016-17 63 69 37 16 87 15
2017-18 63 67 37 15 85 15
2018-19 63 63 35 14 86 15
Source: Indian Railways Yearbook 119
Annexure
Passenger Vehicles Carried by Indian Railways of the Total Vehicle Production
Year
Number of Passenger vehicles
carried by Indian Railways
% share
2013-1428,0001.2%
2014-1558,0001.7%
2015-16100,0002.9%
2016-17120,0003.3%
2017-18150,0003.7%
Source: Indian Railways Yearbook
Share of Domestic and EXIM containers in Total Container Traffic Carried by Indian Railways
YearDomestic ContainersEXIM Containers
2013-1425%75%
2014-1522%78%
2015-1620%80%
2016-1722%78%
2017-1821%79%
2018-1920%80%
Source: Indian Railways Yearbook
Containers Carried by Indian Railways (million Tonnes)
YearDomestic Containers
EXIM
Containers
2013-141133
2014-151138
2015-16937
2016-171037
2017-181142
2018-191248
Source: Indian Railways Yearbook 120IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT
Production of Food Grains (Million Tonnes)
YearsFood grain Production
2014-15252.02
2015-16251.54
2016-17275.11
2017-18285.01
2018-19 (4th AE)284.95
Source: Indian Railways Yearbook
Percentage of Total Production Plus Imports of Food grain Carried by Indian Railways
YearsPercentage
2014-1522.01
2015-1618.13
2016-1715.95
2017-1815.26
2018-19 (P)13.78
Source: Indian Railways Yearbook
Transit-time via Road and Rail plus Road (hours)
RouteRoadRail and Road
Delhi-Chennai90150
Delhi-Guwahati120380
Chennai-Kolkata60160
Bengaluru-Kolkata100160
Hyderabad-Delhi80130
Delhi-Kolkata80130
Delhi-Bengaluru90150
Source: Transport Corporation of India, Edelweiss Research 121
Annexure
Indian Railways : Line Capacity Utilisation
Railway < 80%80-00% 100-120% 120-150% > 150%OTOS* Total
Central34 9 11 12 7 1 74
East Coast 16 9 9 16 2 4 56
East Central 16 13 19 22 16 5 91
Eastern22 22 41 1 – 3 89
North Central 11 3 7 22 2 1 46
North Eastern 12 6 12 6 6 – 42
North Frontier 18 10 4 14 3 11 60
Northern 70 26 29 23 10 4 162
North Western 39 7 6 3 1 4 60
South Central 20 32 23 8 9 – 92
South Eastern 24 13 14 17 1 2 71
South East 9 6 9 7 2 – 33
Southern 53 38 25 15 – – 131
South Western 38 12 – – – 1 51
West Central 1 4 7 6 3 – 21
Western 32 18 17 21 4 48 140
Total 415 228 233 193 66 84 1219
Source: Indian Railways Whitepaper, 2015
Logistics cost as a Percentage of Revenue
IndustryLogistics cost as a percentage of Revenue
Automotive & Auto Component3%
FMCG8%
Textile5%
Cement20%
Pharmaceutical3%
Source: India Logistics and Warehousing, Knight Frank India 122IMPROVING RAIL EFFICIENCY AND SHARE IN INDIA'S FREIGHT TRANSPORT