Coal India wants its own rail network; seeks roadmap from rail ministry

21 May 2018

State-owned Coal India has sought a roadmap from the Union Railways Ministry which will help the company possess its own network of railway corridors and rakes which it feels will help in reducing its dependency on railways for transporting coal.

Shortage of railway rakes has been an ongoing concern for the entire coal consuming sector. Towards the end of 2017, when the power plants in the country faced a severe coal shortage issue, Coal India had boosted its supplies to stave off the crisis and increased routing railway rakes to this effort. In turn, it led to increased complaints from the steel and cement sectors – the other primary consumers – as coal from these segments were otherwise routed to generate electricity.

According to a Coal India official, the August-December period last year was an eye-opener for the Maharatna Company. So long, its primary concern was how to increase production and boost sales as well. Until June last year, it had faced an oversupply situation as coal demand remained muted. However, things changed suddenly.

The official noted that it was only a matter of days when Coal India realised that besides upping its production, it needs to focus on building its own logistical capability.

“We have always been working jointly with Railways to supply coal and the synergy increased during times of the power crisis last year. But then we realised that it is much better for us if we have our own logistical network”, the official said.

Nevertheless, the company, which is on a diversification drive now, also realised that without the support of railways, building the rail network is impossible.

“We have thus asked railways to come up with a plan for the future which will not only help Coal India to seamlessly supply coal but if we are able to purchase our own rakes, it would free up Railways’ rakes allocation to other sectors as well”, the official added.

Under this proposal, railways will be issuing tenders to purchase rakes on behalf of Coal India as well as deploy the coal corridors and new-age technology based wagons like high-tensile aluminium wagons can be procured.

Already its major coking coal producing subsidiary, Bharat Coking Coal is putting up new railway lines at an estimated cost of Rs 2.34 billion, which will help evacuate 25 million tonne (mt) of additional coal every year. Central Coalfields, which is challenged with remote mines, has deposited Rs. 9.12 billion last year with railways for lines upgradation and extension work.

South-Eastern Coalfields, its second largest coal producer is also estimated to have spent Rs 3.74 billion last year on improving evacuation facilities. Mahanadi Coalfields, its largest subsidiary has also already spent Rs 11.27 billion on improving railway logistics.

Western Coalfields which caters to the western part of the country where the power situation had once worsened last year, has also spent Rs. 116.53 million to improve its railway infrastructure in Maharashtra alone.

Preliminary findings have revealed that Coal India may need to spend around Rs 200 billion to build its railway logistical capability which may drain its monetary reserves. However, a company official stated that since rake procurement, as well as construction, of the coal corridors will happen in phases, Coal India’s capex may not increase more than Rs. 15 billion in a year.

Coal India’s rake loading per day during April this year to the entire coal consuming sector grew by 10.4 per cent as it loaded 245.7 rakes on an average compared to 222.6 rakes per day during April 2017. However, increased demand for rakes from Coal India reduces its availability for other sectors. In January this year, the union steel ministry acknowledged the problem and stated that it is in talks with the railways ministry to sort out this issue.

Source: BUSINESS STANDARD