Road cheaper than rail for moving heavy logistics: DPIIT

The cost for heavy duty trailers is estimated to be far lower at Rs 1.51 per tonne per kilometer (PTPK) — the lowest cost — reaping the benefits of economies of scale while giving a tough competition to Railways, taking into account benefits of first and last mile connectivity of road logistics, says a study by the government.

Assessment of Logistics Cost in India by Logistics Division, Department For Promotion of Industry and Internal Trade (DPIIT) says that rail logistics emerges as a cost-efficient mode, with an average cost of Rs 1.96 per tonne-km, in cases where the first/last mile of the consignment is not taken into consideration.

Given the focus of the government on promoting multi-modal transport, for short-haul movements, pure road transport remains more economical due to high costs associated with first- and last-mile handling in multimodal set-ups, coupled with additional terminal-handling and trans-shipment costs.

Rail’s cost efficiency over longer hauls starts to outweigh the additional costs, an advantage which grows significantly as the distance increases. However, for heavy duty trailer of axle weight above 55 tonne capacity, the cost fall below the average rail logistics cost.

“The break-even point between road and multimodal transport appears at around the 600 km mark, where approximately 500 km are carried by rail and 50 km each are the first-mile and last-mile distances. Beyond this distance, multimodal transport becomes the more economical option. With an increase in first- and last-mile distances to, say, 100 km each, the break-even point gets pushed to around 1,000 km, where 800 km is covered by rail,” it said.

However, in a practical scenario, road transport dominates on several routes even for longer distances. This is because it provides door-to-door service, involves lesser hassles of documentation & formalities, and is more suitable for specific types of cargo, it further added.

The assessment places India’s logistics cost at 7.97 per cent of GDP, with detailed insights across modes, product categories, and firm sizes for 2023-24. The estimates derived for the previous five years show that the pace of growth in the logistics cost is gradually slowing down compared with the pace of growth in non-services output.