Rail is cheaper than road, but MSMEs remain locked out of the savings
A KPMG-FICCI report says rail freight costs Rs 1.96 per tonne-km versus Rs 3.78 by road, yet terminal gaps, access charges and wagon constraints limit MSME use. Fixing these barriers could shift 100 million tonnes of freight annually to rail.
What happened
Indian Railways · A KPMG-FICCI report finds Indian MSMEs cannot fully access rail freight’s lower rates because of weak goods sheds, terminal access costs,
Key facts
- Rail freight: Rs 1.96 per tonne-km; road: Rs 3.78 per tonne-km
- India logistics expenditure: Rs 24.01 lakh crore in 2023-24, or 7.97% of GDP
- Micro-enterprise logistics costs: up to 16.9% of output; large enterprises: 7.6%
- Rail-road multimodal cost competitiveness: 500-600 km
- Rajkot-Delhi rail advantage: 2%
- Nashik-Kanpur rail cost premium: 26.4%
- East Singhbhum-Ghaziabad rail cost premium: 24.8%
- Private terminals: 37% of terminals, handling 70% of inward and 72% of outward traffic
- Goods sheds: 63% of terminals, handling 23% of inward and 19% of outward traffic
- Active wagon fleet: 302,663 in FY2021 and 346,366 in FY2025
- Open high-sided wagons: 57% of fleet; container wagon category: about 8%
- Potential MSME rail freight market: 100 million tonnes annually
- Potential additional annual rail revenue: Rs 8,700 crore
- Potential emissions reduction: 4.5 million tonnes CO2e annually
Why this matters
Railways, 3PLs, aggregators and retail supply-chain players have a partnership opportunity to build shared terminals, digital booking and first/last-mile services that can unlock significant freight migration.
What to watch
- New Railway Board policies reducing minimum shipment thresholds, access charges or terminal handling fees for MSMEs.
- Investment announcements for private freight terminals, multimodal logistics parks, cargo aggregation centers and last-mile rail connectivity.
- Wagon availability trends, container rake utilization and turnaround times on major manufacturing-to-consumption corridors.
- Launch of digital rail-freight booking, guaranteed-capacity products or 3PL-managed shared wagon services.
- Evidence that rail freight share rises in FMCG, apparel, consumer durables, food processing and other retail-linked categories.
- Changes in diesel prices, road tolls, GST logistics compliance and state-level restrictions that widen or narrow rail-road cost differentials.
- Retailers with regional distribution networks should map lanes above 300-500 km where consolidated rail movement can reduce inbound freight costs.
- MSME suppliers should test pooled-load arrangements with 3PLs, freight forwarders, cooperatives or industry associations rather than pursuing dedicated wagon capacity.
- Large retailers and marketplaces may build rail-linked consolidation hubs near consumption clusters, using road transport only for final delivery.
- Procurement teams should negotiate freight contracts with separate rail line-haul and first/last-mile components to expose where savings are being lost.
- Logistics providers should develop small-consignment rail products, including scheduled container services, terminal pickup, inventory visibility and damage-claim coverage.