Economics of Rail and Road Transportation Around the World

Rail and road are the two major ways to transport a vehicle on a regional, national, and international level. In this article, we will compare both these transportation modes based on economics and find out which one is superior.

Economics of Rail and Road Transportation

  • Rail is not a major method for the movement of passengers in the US. According to the U.S. Government website of the Transportation Department, United States move around ten percent of total freight via rail. This country has got a peak current commercial track length of over 200000 km.
  • On the other hand, Russia has 95% of the total rail share in freight movements.
  • Rail is the principal option for the movement of passengers in India. Indian Railways run around 65000 km as Union Pacific and BNSF. It earns approx. $4.6 Billion revenue generation for just passenger movement.

The difference between Indian railways and other types of railways is that the former also carry passengers. The total revenue generated by Union Pacific and BNSF is the same (around $24 Billion).

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Operating Ratios in BNSF And Union Pacific

There is a difference in operating ratios. Where BNSF hires 44,000 people, Indian railways not just hires 1.3 Million, but also provides pension to 1.4 million people. BNSF offers high efficiency and cost-cutting.

On the other hand, Indian railways are business-oriented and customer-centric. The subsidized passenger fares make it a cost-effective travel and transportation option for people.

Though the cost incurred in freight movement is low but in the U.S. the price of rail freight is coming down drastically. In the past 30 years, the cost is reduced to 50% of the total tariffs. This benefit is due to innovation, enhancement in efficiency, and cost-cutting.

Cost Incurred in Rail and Road Transportation

Interstate borderless travel in India creates massive advantages in terms of transit time, lesser inventory, and more probable delivery efficiency. The estimated cost of transportation can go up to several billions of dollars.

A majority of such costs are paid by the customers. The movement of perishable commodities leads to a lot of wastage. Moreover, lack of cooling amenities incurs more logistics cost for these items.

The eminence of the road infrastructure regulates the truck size. The eighteen-wheeler truck in established countries and ten-wheeler trucks in India makes an immense difference in the finances of road transportation.

How Rail Transport Is More Beneficial Than Road Transport?

  • Rail transport is affordable. The cost of fuel needed for rail transportation is expensive than road transport. The cost difference is huge when a bulk freight needs to be moved.
  • As trains burn less fuel, shipping via rail is eco-friendly than truck-based transportation.
  • Trains can haul large loads. They can also deal with high amounts of freight.
  • Railways are pretty reliable. They have consistent transit schedules. Rails also do not share their lines with the public as trucks do.
  • Rail freight is far more efficient.
  • Rail shipping options offer improved access to capacity.


There is no doubt that road transport is the ideal transportation mode for freight. However, for specific loads, railways offer more advantages. Rail transport offers a mode time and cost-efficient solution for the entire supply chain.