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Increasing rail freight is essential for advancing decarbonization, ET Infra

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Decarbonisation of freight transportation has emerged as a major imperative given the segment’s huge contribution to pollution.

Globally, transport accounts for a fifth of carbon dioxide (CO2) emissions. As much as three-quarters of the emissions from transport come from vehicles on the road, of which 30-35% is from freight trucks.

The modal split of freight transportation varies based on geography, the nature of commodities, availability of fuel, the relevant legal and regulatory framework, availability of transportation vehicles, and the state of infrastructure.

For instance, in the US, rail enjoys a modal share of ~30%, while in China and the European Union it is ~15%, and in Georgia and Ukraine, over 70%.

In Norway, Japan, and the Netherlands, on the other hand, coastal shipping and inland waterways have over 40% share.

In India, concerted interventions could include a modal shift from roads to rail, coastal shipping and inland waterways, use of electric commercial vehicles (eCVs), and improvement in engine technology.

The priority would be a modal shift to rail, which has a 27-28% share of freight in the country currently. That’s because rail trumps roads on two fronts: not only is it much less polluting, but also logistically cheaper.

Efforts on to increase the share of rail.
The National Rail Plan (NRP) 2020 has envisioned a doubling of rail’s share of freight loading by 2030.

Indian Railways and its subsidiaries have been progressively addressing challenges to attract more cargo to trains, with focus on expansion of the rail network, conversion of gauge, and electrification.

Availability of rakes and locomotives has improved over the past few years, reducing the waiting time for cargo.

Policies have been enacted for private sector involvement in laying tracks, owning and using specialised wagons, owning and running trains, and developing private freight terminals/inland container depots. Furthermore, to provide an exclusive corridor for freight, work started two decades ago on dedicated freight corridors (DFCs).

Riding on all this, Indian Railways logged its highest ever loading, at 1,512 million tonnes, in fiscal 2023.

That said, rail’s share of freight has not increased over the past decade. The share of road and rail transport in freight changed from 61% and 25%, respectively, in 2013 to 63% and 19% in 2020. The trend seems to have reversed in 2023, to 61% and 27% for roads and railways, respectively. But this could change in the decade to come.

The completion of DFCs will directly impact container stacking (height restrictions) and load-bearing capacities, train length, average speed/ turnaround time (TAT), congestion level, and operating cost. DFCs provide an exclusive corridor for freight movement; longer trains can run faster, carrying more cargo per wagon.

For instance, train length can be doubled from 700 metre to 1,500 metre, thus increasing the number of wagons from 58 to 120. Maximum train load can be increased from 4,000 tonne to ~13,000 tonnes.

High-power engines, increasing from 5,000 HP to 12,000 HP, can be used to carry increased tonnage with higher average speed of 60-70 kmph compared with the current average speed of ~25 kmph. Double stacking of containers in such trains will allow ~350 TEU (20-foot equivalent unit) per train instead of ~90 TEU currently.

This will increase reliability of the system, reduce operating cost and TAT, thus lowering the overall cost of transportation, as well as inventory carrying requirements – incentivising transporters to choose railway transportation. As per Indian Railways, DFCs are expected to save over 450 million tonnes of CO 2 in the first three decades of operations.

However, success would be contingent on various other simultaneous developments: among others, (i) improvements in the rail network, warehousing facilities, logistics parks and road network in sync with the DFCs; (ii) leveraging technology for ensuring high efficiency in rail operations; (iii) tariff rationalisation for cargo owners and logistics players to realise the targeted cost benefits; and (iv) avoidance of rail blocks, which have caused implementation delays, by addressing historical challenges.

Creative approaches needed to sustain achievement
Going forward, we need to explore more innovative approaches. For instance, a multi-modal logistics authority of India (MMLAI) can be set up to focus on operational aspects like the way PM Gati Shakti focuses on infrastructure development, planning, and implementation.

Another initiative can be for the private sector to set up an industry body to introduce a standard framework for underlying technology and data management in logistics. Transformation of public-private partnerships (PPP) frameworks in railways can pave the way for long-term sustainable increase in modal share of railways.

A dialogue with e-commerce stakeholders can provide ideas on their needs and potential solutions from railways.

Similarly, an innovation start-up through collaboration of relevant entities can focus on efficient cargo consolidation, creative interventions in handling/packing/storage practices and equipment, and in wagon designs – thus attracting commodities that have the potential to shift to railways.

Given the impact on decarbonisation, the government can take steps to evolve the environmental, social, and governance (ESG) funding ecosystem for rail entities. Infrastructure investment trusts, ESG bonds, carbon credit programmes for transporters/cargo owners, SEBI regulations, and other ESG funding and incentive mechanisms can be explored.

Railways need not compete with roads in all cases. For instance, substantial collaboration is possible for last-mile connectivity.

A railway-driven eCV ecosystem, with active collaboration with the private sector, driven by auto majors and funded by ESG funds, is a definite possibility.

Furthermore, an integrated industrial planning approach focusing on distributed manufacturing and processing hubs closer to demand centres along with port-based export/import processing hubs, can reduce the overall requirement of freight transportation per se.

There is a long-term goal of true separation of ownership of track infrastructure from operations and rolling stock, with market-driven dynamic pricing. This has its own pros and cons. Merits include asset sweating, transparent pricing, and enhanced competition. Separation of roles in future can lead to enhanced efficiency, corporate decision making, and market orientation in the railway ecosystem.

Ambitious, but possible
The modal shift-driven decarbonisation goal is ambitious, but possible. Solutions are within sight, backed by appropriate thought leadership. We just need to collectively take it up in a mission mode, now and consistently going ahead.

The government’s goal of increasing rail’s modal share in freight transportation from the current 27% to 45% by 2030 might be aspirational, but an increase of 10-12%, taking it to a level of 40% is possible.

As per CRISIL’s estimates, trucks are responsible for ~5% of total annual emissions in the country. Thus, an increase of rail’s modal share to ~40% from 27% at present, with a corresponding reduction in road’s modal share, can reduce CO 2 emissions from trucks by ~20% (12% of 61%), translating to an impact of ~1% in the country’s annual carbon emissions (~3 billion tonnes), which is ~30 million tonnes of CO 2 per year at the current levels.

That, combined with other interventions in freight transportation, can materially lower carbon emissions from the transportation sector in India.

(This article has been written by Ashutosh Bhandari, Senior Practice Leader – Consulting, CRISIL Market Intelligence and Analytics)

  • Published On Sep 25, 2023 at 12:52 PM IST

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