Indian Railways eyes FMCG to diversify freight basket and raise revenues

Indian Railways is looking at fast moving consumer goods (FMCG) as a key commodity of its freight basket soon and has called for an industry meet next week to deliberate on opportunities for rail-based transportation.

The move comes as several reports have projected a slowing of the growth of traditional railway freight commodities such as coal, cement, and steel by FY30. About 65% of Indian Railways' earnings come from freight movement and are a key source of revenue for the public behemoth.    

Indian Railways freight basket remains dominated by traditional commodities, which have contributed to modest overall growth in railway freight volumes, with a CAGR of only 5.6% in the past five years.

To rework its strategy, Railways is organising a focus group discussion on “Increasing the Modal Share of Railways in FMCG Freight Traffic in India” on January 21.

“The session will provide a platform for the FMCG industry players and Indian Railways to deliberate on opportunities for rail-based transportation, identify challenges related to policy, infrastructure, and operations and explore collaborative strategies to improve rail adoption in this segment,” said a communication to the FMCG industry.  

A PwC report released in July 2025 noted that the commodities with low/negligible rail modal share are projected to grow at an average CAGR of approximately 10%, whereas traditional rail commodities are estimated to grow at an average CAGR of approximately 5%.

This growth in low/negligible rail share commodities is primarily driven by lightweight, high-volume goods such as consumer durables, paper and paper products, pharmaceuticals, textiles, and FMCG.

Future growth

In recent years, IR has introduced schemes such as the Joint Parcel Product–Railways Cargo Service (JPP RCS) and the Parcel Cargo Express Train (PCET) to promote this segment. However, the modal share for parcel-based cargo by rail remains low, necessitating additional interventions for a modal shift from road to rail.

“Another opportunity lies in the automobile sector, specifically two-wheelers and passenger vehicles, which fall under the low rail share category but exhibit strong growth forecasts. IR has focused on this segment by modifying the AFTO scheme, introducing modern rolling stock and assisting the development of new automobile loading terminals,” said the report.

Haulage charges remained unchanged from 2013 to 2023, indicating cost stability. These efforts have increased the modal share of rail in automobile transport from 1.2% in FY14 to approximately 20% in FY24. However, there remains substantial potential for further expansion in modal share given the projected growth in this segment.

To meet its target volume of 3000 million tonnes by 2027 and modal share of 45% by 2030, IR needs to evaluate and rethink approach.

“In this context, diversifying the rail freight portfolio is not only a strategic objective but is also essential to enhance rail modal share and overall rail freight growth. Expanding into high-growth, underrepresented commodity segments is critical for achieving its medium- and long-term objectives,” the report added.