Improving rail accessibility for micro, small, and medium enterprises (MSMEs) could lead to significant growth in rail freight by reducing logistics costs and attracting a new customer segment, according to a report by FICCI and KPMG in India.
Many MSMEs still rely on road transport despite the cost advantage of rail due to challenges like fragmented consignments, limited cargo aggregation, and first- and last-mile constraints. The report highlighted that rail freight costs an average of Rs 1.96 per tonne-km, compared to Rs 3.78 per tonne-km by road, with a national network operating on a unified technical and digital platform.
MSMEs play a crucial role in India’s economy, contributing over 31% of the GDP, 35% of manufacturing output, and almost half of the country’s exports. To enhance rail accessibility for MSMEs, the report suggested measures such as strengthening freight aggregation platforms, modernizing terminals, and improving digital interfaces.
The report emphasized the need to enhance first- and last-mile connectivity, adopt demand-driven wagon planning, and improve digital visibility for MSMEs to leverage the benefits of rail transport. Sameer Bhatnagar from KPMG in India highlighted the potential for a mutually beneficial relationship between rail and MSMEs in India’s freight ecosystem.
Union Minister of Road Transport and Highways, Nitin Gadkari, previously mentioned that India’s logistics costs could decrease to 9% with the current pace of road infrastructure development. Research by IIT Bangalore, IIT Kanpur, and IIT Chennai indicated that recent road infrastructure enhancements had already reduced logistics costs by 6% to around 10%.
