Decarbonizing Transport: Enabling A Shift To Railways Is Essential For Meeting Climate Goals

Promit Mookherjee Aug 17, 2021

As the 2030 deadline for meeting national commitments under the Paris Climate Agreement approaches, countries are taking stock of their progress. While India has been successful in many aspects of its commitment, some gaps still exist. One such area is the commitment to achieve a 45 percent share of rail in land transport. While this has always been an ambitious goal, we have failed to make any progress for achieving this target and have gone in the opposite direction instead.

A recent analysis by The Energy and Resources Institute (TERI) suggests that the present share of rail transport could be as low as 27 percent and 10 percent for freight and passenger movement, respectively. For freight, this represents a major decrease from the estimated 35 percent share in 2005. The commitments were framed based on this target. With the subsequent growth of the aviation sector and improvements in road connectivity, improving the share of rail in passenger movement is a challenging proposition. However, given that 60 percent of freight ecosystem consists of bulk commodities well-suited for rail movement, a better outcome was expected from freight movement.

Decreasing share of rail has adverse environmental consequences

The shift from rail for freight transport has the potential to set us back significantly. Freight movement by road is around five-times more carbon intensive than rail. As a result, annual carbon emissions from freight transport are estimated to have increased four-fold since 2005. This story becomes really worrying when we consider that freight demand is expected to grow seven-fold by 2050. If present trends continue, this could become a major hurdle towards achieving our Paris goals and ensuring net-zero emissions by mid-century.

Beyond climate change, road haulage is also associated with ten times more nitrogen oxides (NOx) and particulate matter (PM) emissions. A study in 2014 found that freight accounts for 67 percent of the total PM2.5 emissions and 62 percent of the total NOx emissions from the transportation sector in Delhi. It is also a major cause of accidents and congestion in our already overburdened cities.

Building diverse capacity is the way ahead for Indian Railways

The most talked about issue has been the inability of Indian Railways to modernise its assets and provide adequate track capacity. This has lead to low speeds, uncertain delivery times and inadequate wagon availability. The stagnation has been caused by a long period of underfunding, as policy focus has drifted more towards improving road infrastructure and rural connectivity. Since the 2000s, annual public infrastructure expenditure on roads and bridges alone has been around 1-1.2 percent of GDP. For railways, on the other hand, it was only 0.4 percent. Taking this into consideration, the National Transport Development Committee (NTDPC) has suggested ramping up investment in railway infrastructure to 1.2 percent of GDP.

In line with the recommendations, there have been infrastructure improvements related to network decongestion and expansion. A notable milestone was the announcement of a $137 billion five-year investment plan by the government after 2015. Significant progress has also been made towards the switch to electric traction. More than 25,000 kms of running tracks have been electrified since 2015 and 68 percent of the entire network is already electrified. More recently, the National Rail Plan has identified an investment roadmap of around Rs 15 lakh crores over the next 10 years. Around 66 percent of this investment would be towards track infrastructure, followed by rolling stock (20 percent) and terminal upgrades (5 percent). The construction of six dedicated freight corridors could also be a gamechanger as it will greatly improve freight delivery times. Timely execution of planned investments would go a long way towards resolving capacity bottlenecks for freight movement.

Will capacity building alone be enough without relooking at tariffs?

Expanding capacity alone is unlikely to improve freight loading. Railways will need to drastically improve its marketing and tariff policies as well. Freight tariffs have been artificially high due to the cross subsidisation of the Rs 40,000 crore annual losses from passenger services.

Presently, the ratio of passenger fare to freight rate is about 0.3, which is significantly lower than most other countries. Because freight traffic bears most of the so-called ‘social burden’, the present tariffs do not reflect the actual cost of providing the service. As a result, tariffs are not as competitive as they could be if a marginal cost-based approach was followed.

Going forward, Railways will need to shed its perceived role of a departmental undertaking with public service obligation and adopt a more ‘business-like’ approach to tariff setting. For passenger services, this means that focus must be on improving the operating ratio by shutting down unproductive lines and rationalizing passenger fares. This will provide the breathing room required to provide competitive tariffs for the freight segment.

Another key issue is the charging of uniform tariffs across the country by Railways. In contrast, truck rates are decentralized, dynamic and responsive to regional differences. As a result, Railways loses out on traffic in areas where truck rates are low and loses out on revenue where truck rates are higher.

A multi-pronged approach towards increasing freight adoption

Railways’ marketing policies will also need to adapt to the changing freight market. This will require a dual focus on maintaining the share of traditional rail-friendly commodities and making best efforts to attract newer commodities. A commodity specific approach is required, with policies designed in collaboration with potential customers. To attract newer commodities, bold initiatives will need to be undertaken for Railways to become an end-to-end service provider.

Road sector also plays a vital role in first and last mile connectivity for rail movement, so it will need to be taken on as a partner. Widespread partnerships with aggregators through clearly defined business models and regulatory mechanisms will also be beneficial. While creating a seamless multi-modal system for container and parcel movement is crucial for Railways to start attracting newer commodities, this has been a perennial problem. A more aggressive business development strategy could go a long way towards resolving this.

Surprisingly, the COVID-19 pandemic has actually led to an increase in the freight loading on Railways. The main reason for this has been increased capacity due to limited passenger operations and increased attention on the freight business in the absence of passenger revenues. This is a good starting point, and the momentum will need to be sustained. While the Indian rail system has always been seen as the backbone of the economy, now we must realize its importance for achieving climate change goals and double down on multi-pronged efforts to promote rail movement.