The National Development and Reform Commission said on Tuesday it has approved a freight railway whose fees will be based on market demand - the first of its kind in the country.

The railway, named Zhunchi, is controlled by China's largest coal producer and trader Shenhua Group with joint investment from the group and other local companies.

The line will stretch 180 kilometers, spanning the Inner Mongolia autonomous region and Shanxi province.

The railway is under construction and scheduled to start operation in the first half of 2014.

Freight transportation prices for the railway will be decided by its owners, providing another choice for rail clients in the region.

The railway is considered another step in China's market-oriented reform.

With total investment of 13.46 billion yuan ($2.17 billion), it will have an annual capacity of 200 million metric tons.