Freight rates on coal supply: CIL asks for discount, Railways says no

The national transporter has indicated that it has no plans to give concession for distances between 701 to 1400 km

National miner Coal India (CIL) has asked the Indian Railways to provide a 15 per cent concession on freight rates for supplying coal to power units located at distances of 701 km and 1,400 km. The Indian Railways, however, turned this down.

The request is in line with the efforts of the company and the Centre to reduce coal imports. The company said the plea comes in the wake of the Railways offering a 20 per cent distance-based concession on rail freight price for transporting coal and coke, among other commodities, to distances in excess of 1,400 km.

“Extension of freight concession also to customers located in 701 km to 1,400 km could result in substantial domestic coal lifted by them in place of coal sourced from abroad due to lower conveyance cost,” said a senior executive of the company. Coal produced by CIL would then be competitive with the landed price of imported coal, said the company.

However, the national transporter has indicated that it does not plan to provide such a concession.

The concession – effective from July 1, 2020, to June 30, 2021 – was given on the normal tariff rate (NTR). However, after applying the concession, freight price should not be less than the NTR for distance up to 1,400 km, a senior Railways official, requesting anonymity.

“We understood that the traffic over 1,400 km is very less for the Indian Railways. However, coming out with the same sops for 701 km to 1,400 km will not be viable, as the majority of coal traffic for us comes in this distance limit,” the official said.

Despite this, the Railways is considering options like giving concessions if a particular customer is lifting more than a certain limit of coal over that distance limit.

Out of 126 coal-based thermal plants linked to CIL, 14 located over 1,400 km away are eligible to avail of the freight concession. Executives said this prompted CIL to approach the Railways to seek concession for distances of 701 km to 1400 km as well to bring more customers under the ambit of the scheme.

“If this happens it would be a shot-in-the-arm for CIL in its efforts to substitute imported coal with its own produce,” said the executive. CIL had earlier floated several schemes to reduce import of coal, especially the power generation sector.

Owing to the decline in economic activities because of Covid-19, coal traffic has seen a decline of 24.52 per cent so far in the current financial year. Coal traffic between April 1 and August 11 was seen at 165.16 million tonnes (MT) compared to 218.81 MT in the corresponding period of 2019-20.

CIL executives said the price of CIL’s coal is considerably lower than imported coal. “But statutory levies and rail freight make the landed cost of its coal less competitive than imported coal, particularly in the western and southern parts of India,” said the executive.