According to the report, the rail network should be expanded, the rolling stock should be upgraded, and cargo tariffs for most commodities should be reduced by up to 30per cent by 2026–2027. According to the report, this move will assist the railways in regaining a 45per cent market share in India’s cargo market. The committee that wrote the report was led by a Railway Board officer with the rank of principal executive director.
“The railway board has accepted the panel’s report, and work to implement its recommendations has already begun,” confirms a senior railway officer who requested anonymity. “Though the panel’s recommendations call for an interim goal of 3,000 MT of freight by 2026–2027, our overall strategy is to achieve a 50per cent market share by 2030,” the officer adds.
According to the railway’s blueprint, if roadways and railways have a 50-50 market share by 2030 (which means the railways’ share must increase from 27per cent and the roadways’ share must fall from 73per cent), India’s projected logistics cost will be 11per cent of GDP, down from 14per cent now. This 3per cent reduction is expected to result in annual savings of around Rs 15 lakh crore (over $180 billion), assuming India’s GDP rises to Rs 500 lakh crore in 2030. This calculation does not account for the meager share of cargo (in decimals) carried by airways and waterways.
While Railways maintains an official target of 45per cent market share as estimated in its earlier document, “National Rail Plan (NRP) for India—2030,” it has been unofficially revised to 50per cent.
However, the question remains whether such an ambitious goal can be met in such a short question remains, however, whether such an ambitious goal can be met in such a short period, especially given Railways’ failure to reverse the steady decline in its logistics market share over the last seven decades. On September 17, Prime Minister Narendra Modi said during the launch of the national logistics policy (NLP) in New Delhi that “luggage should move quickly like a cheetah,” referring to the release of the fastest animal at the Kuno National Park that day.
The Prime Minister made no mention of a railway target in his speech. However, in a written reply to a Rajya Sabha question in February, Railway Minister Ashwini Vaishnaw mentioned the transporter’s plan to increase the modal share in freight to 45per cent.
According to the NLP, the Ministry of Railways should establish actionable points for improving service reliability through timed freight services, lowering the cost of rail-based supply chains, utilising dedicated freight corridors, and providing end-to-end solutions, including first- and last-mile connectivity. “Mission 3000 MT,” the railways internal report, also made a few recommendations to increase its logistics share. It is suggested that the average cargo speed be increased to 50 kmph (from the current 24 kmph).
It has recommended lowering tariffs (or “cost to customer”) by up to 30per cent for a variety of commodities such as cement, food grains, pig iron, and so on. It has proposed the same formula of increasing speed and lowering tariffs in container movement to gain a 32per cent market share, up from 16per cent now.
It claims that lowering tariffs on four commodities—coal, fertiliser, iron ore, and raw steel — is pointless because the share of these commodities is unlikely to increase by more than 5per cent even if tariffs are reduced.
The urgency of increasing railway market share and decreasing road traffic is also driven by environmental concerns. According to the report, carbon dioxide (CO2) emissions from freight transportation are expected to increase by 450per cent to 200 million tonnes in 2020 and 1,214 million tonnes in 2050. Currently, road freight is the most responsible, accounting for 95per cent of such emissions.
An increase in railway freight market share will pay off in two ways: a significant reduction in India’s overall logistics costs and a massive reduction in CO2 emissions.
While the railway report emphasises network expansion and rolling stock (locomotives and wagons), these will only provide marginal benefits in the form of approximately 400-500 MT cargo shifting from road to rail. “Achieving 3,000 MT cargo by FY27 necessitates proactive interventions for attracting incremental tariffs and inducing modal shift through marketing strategy, dynamic pricing, assured transit time, higher efficiencies, commodity basket diversification, enhanced containerisation, enabling piecemeal loading, door-to-door service through intermodal integration, and customer-centric service delivery,” the report says. Without a doubt, the Indian Railways’ freight segment faces significant challenges, including low reliability, poor customer service, and a rigid policy framework.
The report recommends 17 capacity-enhancing measures (for example, 50 new first- and last-mile connectivity projects) and four interventions to increase rolling stock, as 1,55,000 additional wagons and 7,000 electric locomotives will be required from FY23 to FY27. Some of these suggestions are expected to be included in the Union budget in February 2023.
The report also recommended five policy changes, including increased containerization and attracting more automobile traffic. The rail share of automobile traffic in India is very low (3.45per cent) due to many reasons concerning rolling stocks as well as pricing issues, which also include specific measures to entice two-wheeler traffic.
All of these measures will necessitate significant resources for implementation. As stated in the report, the total capital expenditure for these specific works over the next five years is estimated to be Rs 8.5 lakh crore ($102 billion). According to Anurag Sachan, former managing director of Dedicated Freight Corridor Corporation of India Limited, the augmentation of infrastructure and rolling stock is insufficient to achieve a 45–50per cent market share in logistics.
The future scenario is obvious. If nothing changes, the Railways will carry only 1,728 MT of cargo in FY27 and 1,862 MT in FY30, despite the fact that its freight volume has grown annually by 4.1per cent over the last decade. To reach 3,000 MT, the volume must grow at a compound annual growth rate of 16.2per cent. (CAGR).
It is much easier said than done. Railways will need to implement a mechanism just to get close, let alone meet, the target. Diversification of its commodity basket, tariff rationalisation, transit time assurance, and door-to-door service will necessitate disruptive solutions.
“At one point, someone in Rail Bhawan suggested that Railways purchase hundreds of trucks for last-mile delivery of goods.” “A target of 45–50per cent logistics market share necessitates such out-of-the-box thinking,” says an officer.