Indian Railways’ Cargo Containers: Revenue Game-Changer

Indian Railways' Cargo Containers

Discover the secret behind boosting railway revenue with containers! Understand why it is vital amidst mounting pressure on-road routes.

India is currently grappling with mounting pressure on its freight transport system. Road-based goods transportation faces major issues like congestion, environmental pollution, and rising costs. 

On the other hand, the railway system is leading the way in transporting bulk commodities like coal. However, as the global trend towards cleaner and more efficient transportation systems gains momentum, container transportation is emerging as a promising alternative. This shift has the potential to diversify the Indian Railways’ freight portfolio and also offer environmental and infrastructure benefits.

In this article, we will delve into how container transportation can boost the revenue of the Indian Railways and why this shift is essential in terms of reducing pressure on the environment and road infrastructure. 

Let’s get started.

What’s Happening?

Did you know that 65% of freight transportation in India happens by road? As reported by the Economic Times, this heavy reliance on road transport has led to increased congestion, pollution, and higher logistics costs. However, the government has set ambitious goals for the future. They aim to boost the share of railways in freight transportation from the current 27% to 45% by 2030.

Industry experts are optimistic about the Indian Railways’ efforts to expand its market share in container transportation. This shift could yield substantial benefits, reducing the reliance on revenue from coal and other bulk commodities. 

If Indian Railways successfully increases its role in container transportation, it could be a game-changer in India’s multi-modal logistics landscape.

What is Multi-Modal Logistics?

Multi-Modal Logistics Parks is a significant government initiative in India. It aims to enhance the logistics sector by reducing freight costs and time, cutting storage expenses, lowering pollution, and improving consignment tracking and traceability. These parks will also feature container terminals for inter-modal transfer.

But why are we suddenly talking about containers? 

As reported by the Economic Times, Lalit Chandra Trivedi, a railway expert and retired general manager of East Central Railway, suggests that the railway system should shift its focus towards multi-modal containerised transport. This would involve diversifying the transportation system to move beyond coal-centric revenue plans.

In the fiscal year 2021-22, out of the total freight traffic, which amounted to 1,418.1 million tonnes, a substantial 653.3 million tonnes was attributed to coal transport.

Experts express concern that relying heavily on revenue from coal freight might pose a significant long-term risk for the railways. Shifting focus towards containerised cargo is seen as a strategy that can assist the railways in boosting their earnings from freight, diversifying revenue sources, and reducing dependency on a single commodity, like coal.

Benefits of Container Service

Container services work by packing goods into standardised containers that can be easily transferred by various modes of transportation, including road, rail, ships, and even air. These services offer several advantages within the Indian Railways system:

1. Efficient Organisation: Container services streamline the transportation process, making it more efficient and cost-effective. Standardised containers are designed for easy handling and transfer of goods.

2. Cost Savings : Using standardised containers reduces handling and labour costs. It simplifies the loading and unloading processes, making it more economical.

3. Diversification: Containerisation allows for transporting a wide range of goods. This diversification reduces the railways’ dependence on specific cargo types, such as coal, and enables them to tap into various industries.

4. Environmental Benefits : Container services can contribute to environmental sustainability. They promote energy-efficient rail transport, reducing carbon emissions compared to other modes of transportation. This, in turn, lessens the burden on roadways, which can help alleviate traffic congestion and wear and tear on roads.

Challenges Related to Rail-Container-Movement

While rail-container transport offers numerous advantages, it has its fair share of challenges.

1. Dominance of CONCOR: The government-owned company CONCOR holds a major share of the rail-container transport sector. This dominance can limit opportunities for private players and competition.

2. Capital Investment: Private container train operators face significant capital investment requirements, which can be challenging to sustain. The high costs of acquiring and maintaining rolling stock and infrastructure can strain their financial resources.

3. Returns on Investment: Private operators often struggle to generate adequate returns on their investments. The profitability of the rail container business can be uncertain, making it a risk for investors.

4. Terminal Setup: Another significant challenge for container train operators is establishing terminals with rail connectivity for loading and unloading goods. Land acquisition for these terminals is a complex and time-consuming process.

5. Competition from Road Transport: Container train operators face tough competition from road-container transport. Multi-modal logistics companies offer both road and rail options to customers, creating challenges in determining competitive pricing and convincing customers to shift from road to rail transport.

What’s Next?

As reported by the Economic Times, the Indian Railways currently has a share of less than 10% in domestic container transport, while their share in total container transport for export-import (EXIM) movements stands at approximately 30%. This data highlights the substantial room for growth in the market share of the Railways in both domestic and EXIM container movements.

Realising this potential improvement in market share will necessitate robust support from the railways, the government, and the container industry. While the government has taken significant steps in this direction, there is still an expectation of a more strict policy initiative to enhance the role of railways in container transportation.

That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!

*The companies mentioned are for information purposes only. This is not an investment advice.


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