Over the past four decades, the freight movement output of the Indian Railways has increased substantially. The tonnes originating increased over fourfold from 73.2 million tonnes in 1950-51 to 302 million tonnes in 1988-89. During the same period, the net tonne kilometers (NTKMs) increased nearly sixfold from 37.6 billion in 1950-51 to 222.4 billion in 1988-89. This phenomenal increase in freight output has been possible primarily through a) better inputs and b) better utilization of the inputs. In this context, it is the purpose of this paper to: a) Identify the key inputs whose growth have contributed to the increase in freight output, with an exphasis on wagons. b) Analyze the determinants of the improved utilization of wagons. In 1987-88, the empty wagon kilometres was 34% of the total wagon kilometres, up from a low of 26.8% in 1955-56. In absolute terms, the empty wagon kilometres in four wheeler units (FWUs) were 6052 million in 1987-88 while it was 1486 million in 1955-56. This (6052 million wagon kilometres) works out to four trains of nearly 67 FWUs travelling empty, the entire Railway system of 62000 kms, every day. The empty wagon lead has been increasing from 220 kms in 1950-51 to 395 kms in 1987-88. In this context of the loaded and empty wagon movement, it is the further purpose of this paper to estimate the optimal transport effort in terms of a) loaded wagon movement and b) empty wagon movement In order to estimate the loaded wagon movement, the commodity movement pattern has to be estimated. There are nine commodities, all bulk in nature, which account for 91.0% of the goods carried (tonnes originating), generating 89.7% of the tonne kilometres in 1988-89. These nine commodities are coal, iron ore, cement, foodgrains, mineral oils, chemical manures, iron and steel, limestone and dolomite, and salt in the order of importance in terms of tonnes originating. Intrastate allocations are first considered and assumed as taking place by road. Efficient distribution of the remaining surplus/deficit of each of the commodities for interstate movement by rail is assumed and estimated using transportation models for all the commodities.