On increasing Indian Railways’ revenue – Easing the transport of cargo by Railways

Source: This post on increasing Indian Railways’ share in cargo has been created based on the article “Easing the transport of cargo by Railways” published in The Hindu on 31^st October 2023.

UPSC Syllabus Topic: GS Paper 3 Indian Economy – Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

News: This article discusses the actions taken by Indian Railways (IR) to increase its share in moving bulk cargo. It also suggests steps that IR can take in order to achieve this.

What policy actions have been taken to improve Railways infrastructure?

1) PM GatiShakti (PMGS) policy for a National Master Plan (NMP): The PMGS aims to bring synergy to create a seamless multi-modal transport network with the NMP employing technology tools for coordinated planning.

2) National Logistics Policy (NLP): The NLP focuses on building a national logistics portal and integrating platforms of various ministries.

3) Integration of postal and railway networks.

4) One station – one product.

5) Introduction of 400 Vande Bharat trains.

What is the modal share of freight (cargo) in India?

India’s modal share of cargo movement:

Source: Automotive World.

The Railways is one of the cheaper modes of transportation for moving bulk cargo. However, it only has a ~30% share.

What is the distribution of Indian Railways’ revenue?

1) Earnings from goods traffic: Out of Indian Railways’ ₹2.4 lakh crore revenue that it earned in the financial year 2022-23, the freight revenue was ₹1.62 lakh crore (~67.5%).

2) Earnings from passenger traffic: Its passenger revenue reached ₹63,300 crore in 2022-23 (~26%).

3) Other earnings: These include earnings from rents from retiring rooms, rest houses etc, land leasing, bridge tolls, receipts from catering department, etc.

What are the initiatives for increasing bulk cargo?

The IR has taken some initiatives in the bulk cargo arena:

1) Relaxation of rake movement rules: It provides a facility to load from/to multiple locations, permitted mini rakes and introduced private freight terminals (PFTs).

2) Gati Shakti Terminal (GCT) policy: It will lead to all PFTs and private sidings being converted into GCTs.
A private siding is a railway line that is owned by a company and is connected to a railway.

3) Partnership with private freight operators: IR has encouraged them to invest in wagons thus helping in the induction of privately-owned wagons to facilitate specialised traffic like automobiles and fly ash.

What should IR do?

1) Reducing barriers: IR should reduce non-price barriers to entry of private players.

2) Developing common-user facilities at cargo aggregation and dispersal points: Especially in mining clusters, industrial clusters and large cities.

3) Collaboration with State governments: The knowledge of these clusters rests with the States, and thus collaboration with State governments is necessary.

4) Transport new commodities as well: For instance, fly ash.

5) Wagon-design reforms: IR should encourage and liberalise the design of new wagons amenable to higher and efficient loading.

6) Parity in environmental regulation: Absence of stringent environmental regulations in road sector has led to some users moving cargo by road. There should be no such disparity in regulation between modes of transport.

Question for practice:

Increasing Indian Railways’ share in cargo transportation is essential for India to reduce its logistics costs. Discuss the challenges associated with increasing Indian Railways’ share in cargo transportation and suggest reforms to tackle the same.