The better we get at moving freight, the stronger India’s economy will be

A lynchpin of this pursuit is logistical efficiency in terms of time and cost. What it costs to move cargo from one place to another—be it a factory, retail market or ship for export—can make a big difference.

A recent cost assessment of logistics by the Centre reveals that while tough policy measures are being implemented to reduce this burden, we need actionable blueprints to reduce transport costs, which form the bulk of our logistic bills—with storage and warehousing, besides administrative and handling costs, making up the rest.

Overland, road transport has an inherent advantage. It offers door-to-door connectivity, which makes it score over rail carriage for relatively short distances. As railway haulage requires first- and last-mile links, with much loading and unloading to be done, and also terminal handling, it can prove costly.

For longer distances and specific cases, however, the sheer efficiency of moving freight by rail outweighs these costs. Rail is well suited for operators moving bulk material and consolidated cargo in large volumes. Coal, iron ore, cement and fertilizers together account for three-quarters of the goods hauled by rail.

What about other goods?

The commerce ministry’s report spotlights one of our busiest long-haul routes, from Delhi to Mumbai, as a case study. The dominant mode over this 1,400km route remains road transport.

Even though the Indian Railways charges less for the distance carted, expenses on private vendors to take the goods onwards can be quite high. For a Delhi-Mumbai haul, for example, the cost doubles. This bill includes a premium paid to ensure timely delivery, which is critical to business but the Railways cannot always assure.

On the other hand, the report states that Indian Railways accounts for just 7% of India’s overall cost of logistics. Road transport accounts for 42%, warehousing 25%, and moving goods around warehouses, about 15%.

If we look at freight traffic, the Railways has a 29% share. Within itself, this network is cost effective. So, if other costs are lowered, the Railways could gain market share and also help reduce the country’s logistical costs.

No doubt, measures are afoot to align India’s logistical infrastructure with the needs of industry and reduce transit time. As part of the National Rail Plan, the Railways has set itself the target of a 45% share of freight traffic by 2030. To compete effectively with trucks, as the report points out, clients need end-to-end solutions.

For this, the Railways could create an ecosystem for private operators to compete on low-cost services that include rail haulage and also offer predictability, accountability and timely delivery. This would not only give us a robust multi-modal transport system, it would also reduce the country’s carbon emissions, since locomotives are fast going electric while trucks mostly continue to emit the same old fumes as they trundle along.

With rail electrification in progress, the cleaner our electricity grid gets, the greater will be the broad benefits of stepped up rail usage. An effective Railways plan could boost the emerging use of electric and LNG trucks too. With a more vibrant market for cargo services, we would all benefit from lower prices for faster and more reliable deliveries.