Railways to pay lease rental for CIL-owned wagons

Source: FINANCIAL EXPRESS

The revived plan of Coal India (CIL) to buy railway wagons to transport fuel is likely to see the transporter pay the miner lease rental for the rolling stock, similar to the arrangement the Indian Railways has with its arm Indian Railway Finance Corporation (IRFC).

According to officials, an entirely new financing model will be on offer, compared with the terms agreed upon through a memorandum of understanding (MoU) between the railway and coal ministries in 2015. IRFC procures wagons and coaches and leases those to railways against rentals. The same model is likely to be adopted by the transporter for CIL’s investment. “CIL will buy wagons which will be operated by the railways and a lease rental will be paid to CIL. So instead of IRFC financing wagons, CIL will finance them,” said an official. Freight earnings, the mainstay of the transporter’s revenue, of railways will not be affected under the new system, as they are paid by final consumers of coal. At present, CIL uses 260 rakes a day for transportation of coal and it is estimated that it would require 288 rakes a day to meet the country’s electricity generation targets in 2018-19.

The earlier wagon-purchase plan, wherein CIL was to invest Rs 500 crore initially to procure 2,000 wagons, could not materialise as return on investment, which was not part of the pact, cropped up as a bottleneck for the mining company. CIL was subsequently expected to invest around Rs 5,000 crore to buy wagons. Union minister for railways and coal Piyush Goyal announced the revival of the plan last week. Incidentally, the MoU was signed when Goyal held independent charge of coal and Suresh Prabhu was the rail minister.

In another departure from the earlier plan, CIL will now be investing in wagons with axle load capacity of 22.9 tonne, instead of the high capacity 25-tonne axle load wagons as envisaged in the earlier plan. One of the reasons that the MoU could not be materialised was also that the railways failed to lay tracks which could take the load of higher capacity wagons. A 22.9-tonne axle load wagon costs around Rs 20-21 lakh, compared with Rs 25 lakh for a 25-tonne axle load wagon.

“These wagons will be used exclusively by CIL and will be put into use in circuits used by it. So say CCL (Central Coalfields; a subsidiary of CIL) to north India. However, the wagons are likely to return empty,” said the official. The railways usually attempts to load different material in wagons during return journey to maximise profits.

Source: FINANCIAL EXPRESS