Rail freight growth gathers pace as DFCs, tariff reforms widen cargo base

With the 2,843-km dedicated freight corridor network now fully operational, Indian Railways is seeing stronger loading growth across coal, iron ore and other commodities as policy changes seek to shif

A host of factors have come together to potentially usher in a stronger growth phase for freight carried by Indian Railways.

 

The revival comes on the back of the full commissioning of the Eastern and Western Dedicated Freight Corridors (DFCs), expansion in supporting infrastructure such as Gati Shakti Cargo Terminals, and policy and regulatory changes including freight-tariff rationalisation.

 

Freight volumes are also gathering pace, with loading growth spreading across several commodities rather than relying only on the traditional coal business.

 

Indian Railways moved a record 1,670 million tonnes (MT) of freight in 2025-26, up 3.25 per cent from the previous financial year. The number of wagons handled rose 4.56 per cent to more than 29.1 million, indicating greater network utilisation.

 

The momentum strengthened in the current financial year.

 

In the current financial year, loading volumes have risen from 1.3 per cent in May to 4 per cent in June to 9 per cent in July, followed by over 6 per cent in August. The data suggests the improvement is not a one-month spike but a continuing trend across much of the past six months.

Industrial demand gives freight a push

Experts say strong demand for industrial commodities such as finished steel, fertilisers and iron ore has been a key driver, alongside broader economic activity.

 

“Sustained capital expenditure in public infrastructure, housing, and roads has driven continuous demand for core commodities,” said Anurag Gupta, partner, Deloitte India.

 

“Crucially, operational efficiency has also backed this demand as Indian Railways' wagon handling surged 4.56 per cent to over 2.9 crore wagons, reflecting faster turnaround times, better rake availability, and improved traffic management across key railway zones. Thus, while industrial commodity demand supplied the volume, enhanced network throughput made this growth sustainable month-after-month rather than a single-month spike.”

 

He also pointed to the diversification of the freight basket beyond coal towards what the National Rail Plan describes as growth commodities, including consumption goods, manufacturing, construction and agriculture.

 

Even as coal remains the foundational volume anchor, faster expansion in steel, fertilisers, cement, containers and other goods is broadening the mix.

 

“The implications are threefold. First, it de-risks railway revenues from power-sector demand fluctuations as India transitions toward renewables. Second, high-value non-coal goods yield better per-tonne revenue margins, and third, it integrates rail logistics directly with new industrial clusters,” Gupta said.

 

“However, sustaining this shift requires continuous investment in specialised rolling stock, such as automobile-carrier rakes and reefer containers as well as enabling policy provisions.”

DFC network fully operational

The infrastructure backdrop has changed significantly with the completion of the 2,843-km Eastern and Western Dedicated Freight Corridor network.

 

Prime Minister Narendra Modi commissioned the final three stretches of the Western DFC on September 8, completing the entire dedicated freight network. The Western corridor stretches 1,506 km from Dadri to JNPT, while the Eastern corridor spans 1,337 km from Ludhiana to Sonnagar.

 

The corridors are designed to shift freight away from congested mixed passenger-and-goods routes and provide faster, heavier and more reliable freight movement.

 

More than 443 trains are now being operated on the DFC network every day, according to the Ministry of Railways.

 

The infrastructure allows higher axle loads and, on the Western DFC, double-stack container trains.

 

DFCCIL's design parameters envisage average speeds of around 65-70 kmph on the corridors, compared with roughly 25 kmph historically on the conventional rail network.

 

The National Rail Plan has set a target of raising rail's share of freight movement towards 45 per cent, with DFCs expected to play an important role in that shift.

Railways uses pricing to win back freight

Experts say the growth reflects both macroeconomic expansion and measures aimed at inducing a modal shift from roads to rail.

 

Since the beginning of the current financial year, the Railway Board has announced several measures intended to make freight movement more competitive.

 

These include changes to the Liberalised Automatic Freight Rebate (LAFR) scheme for traffic moving in the Traditional Empty Flow Direction (TEFD).

 

The mechanism provides automatic rebates through the computerised Freight Operations Information System (FOIS) for eligible traffic offered in directions where empty wagons would otherwise move.

 

Railways has expanded eligible traditional empty-flow streams involving the Dedicated Freight Corridor Corporation of India (DFCCIL), with the revised provisions taking effect from April 10, 2026.

 

Another example is the Merry-Go-Round (MGR) policy, under which concessions are offered for coal moving in closed circuits. The guidelines have been extended and relevant rates revised by 5 per cent with effect from May 1, 2026.

 

The Railway Board has also moved towards per-tonne-per-kilometre pricing for some commodities, including foodgrains, pulses, fertilisers, fly ash and petroleum products, rather than relying entirely on the earlier slab-based structure.

 

The changes are aimed in part at improving rail's competitiveness for medium-distance freight movements, where road transport has historically held an advantage.

Gati Shakti terminals improve first- and last-mile connectivity

Infrastructure expansion is not confined to the main railway network.

 

Gati Shakti Cargo Terminals (GCTs) are intended to improve first- and last-mile connectivity by allowing private investment in modern freight-handling facilities.

 

Five new GCTs were commissioned in August alone, taking the total number of commissioned terminals to 149 as of August 31.

 

“This growth relies on three synergistic pillars. First, EDFC and WDFC enabled heavy-haul, double-stack container operations, multiplying line throughput,” Gupta said.

 

“Second, policy reforms, specifically shifting freight tariffs from slab-based systems to a rationalised per-tonne-kilometre structure, made mid-distance rail haulage economically competitive against road transport. Third, focus on Gati Shakti Cargo Terminals modernising first-mile and last-mile connectivity. Private investment in these high-efficiency, mechanised terminals has drastically reduced rake detention times and overall handling costs for shippers.”

Diversification could reduce coal dependence

Coal will remain critical to Indian Railways' freight business for some time, but a broader freight basket could reduce the network's exposure to changes in thermal-power demand.

 

This becomes increasingly relevant as India's electricity mix gradually incorporates more renewable energy.

 

Higher-value cargo can also improve freight economics while allowing Railways to connect directly with manufacturing hubs, ports and logistics clusters.

 

The fully operational Western DFC now provides direct connectivity to JNPT, improving access between north Indian industrial centres and one of the country's largest container gateways. The government expects the corridor to reduce transit times, logistics costs and congestion on conventional railway lines.

Freight growth carries wider economic gainsrailwa

At a broader level, sustained rail-freight growth can help lower logistics costs and improve export competitiveness.

 

Rail transport is also significantly less carbon-intensive than road freight on a per-tonne-kilometre basis, strengthening its role in corporate decarbonisation and environmental, social and governance strategies.

 

For Indian Railways, the opportunity is to translate the recent acceleration in loading into a structural gain in freight market share.

 

The National Rail Plan and other freight initiatives increasingly envisage the Railways not merely as a transport supplier but as a provider of customised logistics solutions.

 

Whether the current momentum develops into a sustained freight-growth cycle will depend on the network's ability to continue improving reliability, pricing, terminal access and service quality while broadening the cargo basket beyond its traditional bulk-commodity base.