Deceleration in freight volume growth is a continuing saga at the Indian Railways. Compared with 8.5% growth a year ago, freight volumes fell 4.2% in November this year. In November 2013, volume grew 3%.
The last time freight traffic growth fell into negative territory was in October 2013, when volumes were down almost 2% from a year ago, data from Centre for Monitoring Indian Economy shows.
The deceleration in volume growth is yet another indicator of weak industrial trends. Coal ferried for steel plants dropped 14.6%. Cement and foodgrain volumes have continued to fall. Fertilizer volumes shrank 9%, reflecting poor offtake in the current crop season.
Worryingly, the deceleration in container service volumes, used for both domestic use and exports, became worse.
It’s very probable, of course, that part of the traffic may be shifting to roads, tracking softer fuel costs and because of premium railway rates in certain pockets. But that does not fully explain the structural decline in volumes the railways is seeing.
So far in the current fiscal year, freight growth increased just 1.2%. In the previous four fiscal years, the cumulative growth ranged 4-5.3%.
Perhaps the volume trends are only reflecting the weak demand conditions in the domestic economy. Even passenger volumes have dropped 2.6% (till October this fiscal year). If they continue for long, the weak volume trends can cast a shadow over the railways’ revival plan.
Thanks to rate hikes, gross earnings of the Indian Railways till October are 8% higher than the previous year. But they are almost 9% lower than the budget estimates. Subdued earnings growth can restrict the availability of internal cash flows for capital expenditure, which could prolong the time needed for revival.