*Swapping, rationalisation of coal linkages key to reducing costs
*Indian Railways should re-introduce coal freight concessions
In the past, based on the recommendations of the Standing Linkage Committees (Long Term), a number of long-term linkages were granted to the various State-owned power plants and to IPPs to feed coal to about 78,000 MW. The linkages so granted were based on the requirement, distance from the coalfield, and the incremental production build-up from the CIL subsidiaries.
Such grant of linkages has actually resulted into a criss-cross movement and, in some cases, long distance coal transportation where power plants are located in non-coal bearing states or in the hinterlands. In some cases, linkages were granted to power stations located near the ports.
The Ministry of Coal (MoC) had undertaken initiatives and formed various taskforces to rationalise coal linkage, whereby till now swapping/rationalisation has been done for PSU generating units for domestic as well as imported coal. Rationalisation is also being carried out for IPPs/ private generating units subject to certain conditions like passing on the benefit accrued from reduction in logistics cost to the state discoms in terms of adjustments in power tariff.
This would actually require revision in the PPAs. Later on, MoC allowed swapping of coal between power and non-power entities, NRS vs. NRS for linkages and imported coal subject to the NRS entities passing on the benefit accrued through cost reduction in logistics to the Indian Railways.
Due to the above unattractive part of the policy, there has been low response from the stakeholders though there is a huge potential of savings if rationalisation of linkages and/or swapping of linkages are done in time. Such swapping will reduce the distance over which coal is transported, thereby freeing up railway infrastructure for other gainful uses, as well as lowering the cost of coal.
As per a study carried out by ICRA, for every 100 km reduction in distance for transportation of coal, the landed cost of coal is estimated to decline by 5-8 paise per 1000 Kcal. The excess availability of coal in turn will benefit the stressed power plants having no PPAs with an opportunity to sell on exchange under merchant power.
Similarly, excess coal released from such swapping using import option would benefit NRS as a whole which includes cement plants, CPP units and steel plants based on DRI and coal gasification technology which are suffering due to scarcity of coal.
Concession in freight and levies
Freight rates in the Indian Railways (IR) have been stagnant over the past couple of years. IR has granted distance-based graded concession in case of long lead to the extent of 20% for coal (distance to be more than 1400 km) effective from 1 July, 2020 and was valid till 31 December, 2021. To make domestic coal more affordable for even longer transportation distances, it is proposed to reinstate the concession provided on the long lead tariff for rail transportation of coal.
Re-introduction of concession for short lead goods traffic
* IR introduced concession in base freight rate for short lead goods traffic vide Circular No. 15 of 2017, providing freight concession of 30% (0-50 km), 10% (51-75 km) and 5% (76-90 km), which helped in boosting railway revenues by increased freight volumes and encouraged shifting from road to rail for short distances.
* The concessional freight rates for short lead goods traffic vide Circular No. 15 of 2017, were discontinued vide Circular No. 08 of 2018, resulting in increased logistics costs for short distances, and shifting to road mode as the logistics cost by roads was getting very competitive with the shift to larger-sized trucks.
* The concessional freight rates for short lead goods traffic (0-100 km slab) has been re-introduced for other commodities excluding coal, coke and iron ore (concession of 50% for 0-50 km, 25% for 51-75km, 10% for 76-90 km).
Therefore, inclusion of coal for concessional freight rates for short lead goods traffic will boost railway revenues by increased freight volumes and encouraged shifting from road to rail for short distances.
Need of the hour
It is certain that India will grow at 7-8% in the coming years and may accelerate to double-digit growth to become the fastest growing economy in the world. Such a scenario will trigger multifarious activities involving all sectors and would indeed require a robust infrastructure and logistics including coal movement. It is certain that coal will remain the backbone of the Indian energy sector. It is highly pertinent to give impetus to augment multi-modal coal movement in the country.
(Concluded… This article, the last in a 3-part series, attempts to unlock India’s coal logistics dynamics)
By KAPIL DHAGAT
The author is Executive Vice President and Head BU Coal Jindal Steel & Power Limited (JSPL)
Leave a Reply