Rail freight growth slows as ‘non-coal’ baskets turn sluggish

The Indian Railways is grappling with stagnant growth in its freight business, largely due to a lack of diversification beyond coal transport. Over the past few years, both freight volumes and revenue growth have sharply declined. In FY25, freight revenue growth slowed to just 3.7%, compared to 7% in FY24, 15% in FY23, and 20.4% in FY22. Similarly, freight loading growth dropped from 15% in FY22 to only 3% in FY25.

Data shows that the share of "non-coal" commodities has remained flat, with a slight dip in volumes from 801 million tonnes in FY24 to 799 million tonnes in FY25. Over 51% of the total freight volume was still dominated by coal in FY25, raising alarms about the segment’s over-reliance on a single commodity. Although coal movement has maintained a steady 7.2% CAGR between FY23 and FY25, experts caution that rising renewable energy adoption could eventually diminish coal's role, as seen in countries like the US, UK, and Germany.

Apart from coal and iron ore, which have posted solid growth, container traffic has shown promise with a 17.5% increase over the last two years. This growth has largely been driven by the Western Dedicated Freight Corridor (DFC). Experts believe the momentum will further accelerate once the final leg of the corridor is completed by end-2025. Major commodities driving container traffic include gunny sacks, hot rolled coils, ceramic tiles, wall care putty, and rice.

However, challenges remain. The limited number of rail lines capable of handling container trains, network congestion, and strong competition from road transport continue to hinder overall growth. Meanwhile, the share of foodgrains (3%) and pig iron & steel (4.1%) in the total freight basket has been declining steadily.

The slowdown in freight performance is particularly troubling as Indian Railways aims to achieve a freight volume of 3,000 million tonnes by 2030 and boost its modal share in freight transport from 27% to 45% as per the National Rail Plan. Experts also point out that while road networks have expanded rapidly over the years, the rail network has not kept pace, further intensifying the competition.