You are on page 1of 4

Indian railways’ growing freight traffic

– SEPTEMBER 26, 2012POSTED IN: ARTICLES, RAILWAYS & SUBWAYS

Freight has always been an important revenue generator for Indian railways and has played a significant role in neutralising losses incurred from passenger fares. More good news is on the way for the country’s railway system as according to the report from the Centre for Monitoring Indian Economy (CMIE), Indian railways is all set to witness a jump in freight traffic in the current financial year. This, however, is not first of its kind as in the financial year 2010 Indian railways also witnessed an unprecedented growth in freight volume which was around 6.56% higher than during FY 2009. CMIE’s prediction states that in 2012-13 there will be a significant jump in Indian railways’ freight traffic and freight transportation is expected to grow approximately by 5.2%. In real terms this means that the amount of goods transported through railways will reach 1020 million tonnes. The main reason behind this growth is the heavy demand for coal and iron ores. Coal imports for domestic plantations will witness a major rise, as the production of domestic coal is not sufficient to meet the needs of the country, especially where the power sector is concerned. As a result the import of coal has benefited and is expected to grow by approximately 28.3%. Steel production is also witnessing major suppuration buoyed by infrastructural demand and the automobile industry, which in turn will require the importation of iron ores. The import markets for coal and iron ores significantly impact on freight volume across the railways’ network. It is only since June 2012 that this change of fortunes for freight traffic has been noticed. From April to June there have been significant shifts in the freight scenario for Indian Railways. Compared to June 2011, there was a jump in Indian Railways freight traffic by 4.8% with freight transportation reaching the figure of around 80.4 million. Last year’s freight volume equated to 233.66 million, 11.15 million tonnes less than this year’s figure. This figure has been reached despite fertilisers and iron ore witnessing a sharp decline of 13.7%. The latter’s demand was completely offset by the tremendous demand in steel plant for coal and iron ores. Freight traffic for coal rose by 39.7% during this period which resulted in the corresponding rise of about 29.2% in the overall freight revenue for railways, worth around 6,926 Crore (1,253,606,000 USD). Similarly, iron ores meant for steel plants registered a growth of 40.7% for this period which is approximately equates to 5.2 million tonnes; a significant shift from the previous year. If this level of demand is sustained, Indian Railways is certainly set to witness an upturn in its fortunes, bringing in revenues that will help make up for its shortfall in passenger traffic revenues.

30 million compared to 6777. it is pertinent to note that India has one of the most dense rail networks in the world providing a much deeper connectivity to the interior regions.4 million during April 2010. This cross subsidization has led to increase in haulage charges to an extent where the rail transportation of goods has become unfeasible. 2009 –February 28. The revenue earnings from other coaching amounted to $508. The passenger services have concentrated towards the lower revenue short haul routes due to subsidized rates. Substantial growth in traffic The Indian Railways handles one of the largest volume passenger and rail traffic. 2010 to $12. surging 6.23%. This overdependence on freight for earnings is likely to have an overarching impact on the current resource mobilization capability of the railways. it is also pertinent to note that 20% of 63.26 billion during the same period last financial year.000 km tracks are metre gauge.22 billion compared to $4.74 billion during the same period previous year. This is over and above the passenger transport requirements which will also have to be increasingly met by a more efficient mode. registering an increase of 8.February 2011 compared to $461.64 billion during April 1. which in many cases is not possible by roads. 2011.13 million during the same period previous fiscal. Tonnes of freight carried per capita GDP in India is one of the lowest in the region hence indicating at the opportunity. soaring 7. the logistics costs of the developed countries account to 9% of GDP.15%. The total passenger revenue earnings during the first eleven months of the financial year 2010-11 were $5. 2010 –February 28.33%. if sustained. The logistics cost in India are estimated to be 13% of GDP and are unlikely to see any rationalization until railways is utilized as a more integrated link. Internationally. Railways on the other hand carries almost 14 million passengers a day and 36% of the freight traffic.48 billion during April 1. Nonetheless. The total approximate earnings of Indian Railways on originating basis during April 1. However. The stress on the freight . The total approximate number of passengers booked during April 2010-February 2011 was 7206.20%. Rail despite being the most efficient mode of surface transport is undoubtedly underutilized. 2010 –February 28. Rail transportation costs ¼th of road transport and with every tonne of freight shifted to rail would help reduce the logistics cost by a similar amount. The total goods earnings have gone up from $11.2 billion Indians predominantly depends on roads. Industry pundits believe that the Indian Railway is likely to see a capex jump due to the basic requirement to sustain trade and hence economic growth. Passenger trains utilize nearly 60% of the track capacity though they contribute to only 33% of the traffic earnings. recording growth of 0.Indian Railways Transportation Sector News – June 2011 Indian transportation sector which caters to the needs of 1. rise of 10.22 million during the same period last financial year. where it carry almost 80% of passenger traffic and 57% of freight. The under utilization of this vital asset.24%.68 billion compared to $17. is likely to have a direct impact on India’s economic growth due to lower productivity and loss in competitiveness. hence of limited utility. 2011 were $18. Private sector participation vital Indian Railways has predominantly depended upon the revenues derived from freight transport to subsidize the passenger earnings shortfall.

Indian Railways operates long distance and suburban rail systems on a multi gauge network of broad.8 million tons of freight daily. becoming one of the largest networks in the world. IR owns over 240. with more than 1. It also owns locomotive and coach production facilities. meter and narrow gauges. As for rolling stock.earnings has significantly increased haulage rates which makes the cargo movement by rail unfeasible without achieving utilization levels beyond 80%. In 1951 the systems were nationalized as one unit. Hence. it has become a natural barrier for entry for the private sector players to enter the segment.000 (freight) wagons.500 stations.500 km of total track over a route of 65.000 locomotives.purchasing tickets from the ticket counter at each station is well set up. Sikkim and Meghalaya are the only states not connected by rail. Introduction: Indian Railways has 114. Railways were first introduced to India in 1853. Most regular trains have coaches connected through vestibules. Provision for purchasing tickets via online mode (website of Indian Railway) and offline mode. Product Offering: Passenger Services Indian Railways transports 30 million passengers daily across India. Indian Railways generates 30% of the revenue through passenger services. It is the world's 2nd largest commercial or utility employer. 60. Reservation against cancellation service is a provision for shared berth in case the travel ticket is not confirmed. By 1947. but popular trains can have 26 coaches or even more. A standard passenger train consists of eighteen coaches. the Indian Railways.36 million employees. It has the world's fourth largest railway network after those of United States. The railways carry over 30 million passengers and 2.000 coaches and 9. the year of India's independence. there were forty-two rail systems. All current passenger service is provided using electric or diesel .000 km and 7. Russia and China. by number of employees.

pillows and blankets. Lavatories are communal and feature both the Indian style as well as the Western style. The amenities depend on the popularity and length of the route. etc. such as a 1st and 2nd classes which have different pricing systems for various amenities. 70% of revenue comes from freight services. . Unreserved coach passengers have options of purchasing from licensed vendors either on board or on the platform of intermediate stops. Freight Services Indian Railways carries a huge variety of goods such as mineral ores.locomotives. The 1st Class refers to coaches with separate cabins. petrochemicals. fertilizers. which are highly popular among passengers going on shorter journeys. coaches can or cannot be air-conditioned. Meals and refreshments are provided.Several long trains are composed of two to three classes of travel. But. iron & steel. Freight is a profit making business segment of Indian Railways and is the backbone of railway revenues. agricultural products. recently it is seen that the market share of Indian Railways has been consistently shrinking and railways is losing out to road. either through the on-board pantry service or through special catering arrangements in trains without pantry car. to all the passengers of reserved classes. Achievement of projected freight targets largely depended on the manner in which the Indian Railways reshaped its policies and strategies not only to regain the lost share in freight traffic but also to provide value for money to customers in terms of better facilities and improved services. In air-conditioned sleeper classes passengers are provided with sheets. 3-tier nonAC coaches and 2nd class seating coaches.