Indian Railways: The Economics of a Giant
Freight Pays for Passengers
How Indian Railways charges high freight rates to cover passenger losses, and why this pushes cargo onto roads.
Freight is Indian Railways’ main moneymaker.
The cross-subsidy
To cover passenger losses, the railways charge relatively high freight rates. In other words, cargo customers subsidise passengers.
What it carries
- Coal: the single biggest commodity, often around half of freight tonnage.
- Iron ore, cement, foodgrains, fertilisers, steel, petroleum and containers.
The consequence: losing market share
High freight rates, combined with slow and unpredictable goods trains, pushed many shippers to trucks. Railways’ share of India’s freight fell over the decades to well below half.
Why this matters for the economy
- Higher logistics costs for industry.
- More trucks on roads, raising congestion and emissions.
- Coal transport costs raise electricity prices.
Efforts to win back cargo
- Dedicated freight corridors for faster goods trains.
- Business development units seeking new customers.
- Discounts and new services for containers and small parcels.
A cement company compares rail and road for a 600-km route. Rail freight looks cheaper per tonne on paper, but loading delays and last-mile trucking make road competitive, so it ships more by truck.
High rates and delays can make road competitive for many goods.
- Freight is the railways' main source of profit.
- High freight rates subsidise passenger losses.
- Coal is the biggest freight commodity.
- The cross-subsidy has pushed cargo to trucks.
No recording for this one yet - EconReader can read it aloud for you.