The freight trains heading towards north India through the state of Maharashtra live in a curious half-world between the modern, fast-growing India and the chaotic, slow-paced India of which the British-built railways have been a key part for more than 150 years.

The trains are loaded with containers carrying the names of some of the world’s largest container shipping lines and full of the latest manufactured goods or parts to make them.

But, pulled by ageing diesel locomotives, they trundle along at a leisurely pace – the average speed of an intermodal (container-carrying) train in India is 25kph, against 60kph in many other countries. Impatient motorcyclists have plenty of time to dodge across in front of trains even after level crossing barriers have closed.

The challenge for state-owned Indian Railways – by some measures the world’s largest enterprise by worker numbers, with 1.4m employees – is to make far more of its operations resemble the modern, efficient India.

The railways’ passenger services, which carry 5bn passengers annually but face competition from India’s growing network of low-cost air carriers, face the most obvious problems. But for India’s economy, where the main alternative is heavily regulated trucking services on mostly abysmal roads, and for Indian Railways, which receives two-thirds of its revenue from freight, improvements to freight are just as important.

One answer to the challenges has been to launch a cautious liberalisation process in the intermodal market, with private companies which have bought licences allowed to own their own container wagons and organise their own timetables.

On the infrastructure side, a new, dedicated freight line is under construction from Jawaharlal Nehru Port, near Mumbai, to Dadri, near Delhi. Work on the 1,469km line – which will cost Rs114bn ($2.77bn) – began in October. A later section will link Dadri to Kolkata and, when he was at the ceremony to mark the start of work India’s prime minister, Manmahan Singh, India’s prime minister, called for the network to be expanded eventually to southern India.

The new lines should free up capacity on the existing main lines for passenger services and prevent conflicts between the two. Shipping containers will be carried stacked two high on the new routes, rather than in single stacks as at present, transforming efficiency. Double-stacking – which is extensively used in North America – is impossible on existing routes because many sections are electrified, with the wires too low.

The question remains whether the new corridors will be built fast enough to handle the surge in traffic growth and the liberalisation will be effective enough, given that state-owned Concor, jointly owned by Indian Railways and the central government, will still haul the trains.

CS Verma, chief executive of Gateway Distriparks, an operator of container distribution centres, asks whether the full promised sums of government money will reach the dedicated freight corridors. “The impression based on historical precedents is no,” he says.

Kenneth Glenn, president of South Asia for APL, a Singapore-based shipping line which has gained a licence to operate intermodal trains, points out that Concor will still haul the trains.

The approach is a contrast with the handling of rail liberalisation in Europe, where state railways have been forced to allow privately operated freight trains – complete with privately owned locomotives – to run over their tracks.

“The service will still very much be dependent on Indian Railways as the underlying service provider,” Mr Glenn says. “Our ability to differentiate ourselves in service will have a lot to do with how efficiently we structure ourselves and organise the trains.”

Mr Glenn is also concerned about the rail lines. “Capacity is already heavily utilised,” he says.

Many observers believe the rail sector would change far faster if it were open, like some other parts of India’s infrastructure, to private foreign investment and expertise. It remains far more firmly closed to outsiders than any other parts of the country’s transport infrastructure.

Yet there remains an optimism about India’s railways. That is partly because of the remarkable record of Laloo Prasad Yadav, the controversial but apparently successful railways minister. Under Mr Yadav, the railways have boosted profitability by lengthening and speeding up trains, rather than taking the more obvious steps of raising ticket prices or freight fees. The improvements have, according to some analyses of Indian Railways’ impenetrable accounts, pushed the system’s returns above its cost of capital. As a result, investments should be far easier to finance.

There is also, simply, a feeling that with the railways having only narrowly escaped near-bankruptcy five years ago and efficiency levels so low, almost any effort at improvement is likely to show some success.

Mr Glenn says APL obtained its train operating licence partly because the system contained so many inefficiencies. “Having run trains in the US for many, many years, we believe we can bring that expertise into India and run a much more efficient operation than the market has had available prior to this,” he says.