Ministries of coal, power to finalise freight cost cut plan: NITI Aayog

NITI Aayog is pitching for reduction in freight charges for transportation of coal. This would form part of the policy to optimise the cost of coal in the country, which the central government think tank said would be prepared by coal and power ministries.

The biggest impact, however, would be on Indian Railways, for which coal freight is the highest source of revenue in its freight basket. Responding to a right to information (RTI) application filed by Business Standard, the NITI Aayog said its report was under process and “will be submitted to the Prime Minister’s Office (PMO).”  

“Based on the recommendations of the reports, the ministry of coal and ministry of power will finalise the policy for reduction in the coal freight charges and substitution of the imported coal,” it said in the RTI response. The response did not mention participation of the ministry of railways.

NITI Aayog is conducting comparative analysis to study the cost of transporting coal from one state to another vis-à-vis the cost of generation of electricity from coal and its transportation.

Senior coal ministry officials told Business Standard they were aware of the report that NITI Aayog was preparing. But if any action is to be taken based on the recommendations, views of all stakeholders would be needed, of which the railways is the major one, they said. “As far as imported coal reduction is concerned, the coal ministry and Coal India have raised domestic output significantly and it would be more than enough to meet the demand,” said one of the officials.

The move to draft a policy comes in the wake of the acute domestic coal supply shortage faced by the thermal power units between April-August this year. An almost annual affair, demand-supply mismatch of coal largely erupts from lack of coordinated planning bet­ween several Central departments, states, and power plant operators.

But the plan to reduce freight cost of coal could turn detrimental for the revenues of the national transporter. A senior railway official in the know of the matter said the ministry had so far been reluctant to reduce freight rates for coal, which account for almost half of its revenues. The national transporter made Rs 67,356 crore through ferrying of coal last fiscal year.

The railways ministry did not reply to queries sent by Business Standard till the time of publishing. An official requesting anonymity said there was a significant push from the top echelons of the central government to rationalise freight rates, and the ministry might eventually make some plans to reduce the final cost of transportation.

“To that effect, the ministry is considering changing the framework of freight rate calculation for coastal shipping of coal. Under the rail-sea-rail route, railways charges separate freight rate for the transportation of coal from mine to the port, and from the destination port to power houses,” the official said.

Under the proposed framework, known as telescopic freight calculation, the ministry is likely to club the two journeys and classify it as a single consignment.

Coal freight is the biggest source of revenue of railways, accounting for almost half of its freight basket which earned the national transporter Rs 1.43 trillion in 2021-22. In June, average coal freight lead — the distance travelled by rakes — increased to 565 km from 465 km a year ago.

The railways, on the other hand, is planning to have an over-arching autonomy over coal transport, Business Standard reported recently.  The proposal is being worked on under PM Gati-Shakti national Master plan.

CAUSE FOR CONCERN
 

The plan to reduce freight cost of coal could turn detrimental for the revenues of Railways

• Coal accounts for almost half of Railways’ freight basket

Rs 1.43 trn Railways earned in 2021-22 

• Average coal freight lead by Railways

565 km in June from 465 km a year ago