Railways rationalises coal freight rates

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 New Delhi,Lower earnings from coal transportation has prompted the Indian Railways to raise tariffs for short-distance haulage of the fuel. At the same time, to incentivise long-haul coal transportation and achieve higher volumes, freight rates for transportation beyond 700 km have been reduced.

The Indian Railways has also imposed a ₹55 per tonne ‘Coal Terminal Surcharge’. The levy will be applicable at both the loading and unloading terminals for coal transport of beyond 100 km.

According to a circular of the Railway Board, the rates for coal haulage between 200 km and 700 km have been raised by 7 per cent to 13 per cent, depending on the distance. For haulage beyond 700 km, the rates have been reduced by around 4 per cent to 13 per cent, depending on the distance. For haulage of up to 200 km, the rates have been left unchanged.

Burden on power sector

Power producers expect the increased rates to result in higher power tariffs. “With so much increase in the railway freight, energy tariff from coal based power plants shall increase by 8-10 paise per unit…Inability to pass such tariff shall further deteriorate financial condition of distribution companies and power generators…Railway needs more investment but the burden of the same should be shared by everyone…Imposing all the burden on always stressed power sector could have been avoided,” said Lalit Jain, Group Chief Commercial Officer & CEO (Solar, International & Wind) of Hindustan Power Projects.

While the increase in short haul transport of coal by rail is expected to hit power producers near coal-bearing areas, over 20,000 MW of coal based power plants in states such as Tamil Nadu, Karnataka and Kerala can benefit from the lower rates for coal haulage via rail beyond 700 km.

“Lower freight rates will incentivise several plants in the southern region to source domestic coal. As a result, if there is higher movement of coal, despite the lower rates, it would help in improved earnings for the Railways,” a senior official in the power industry said on condition of anonymity.

Similarly, pit-head power plants, which are run mainly by NTPC Ltd, will remain unaffected as the distance will be less than 200 km.

Revenue-neutral move for Railways

According to media reports, Railway Board Member (Traffic) Mohd Jamshed claimed that the move is revenue neutral.

The Indian Railways witnessed a 10.77 per cent decline in freight earnings for April-July 2016 at ₹25,149.79 crore as compared to ₹28,185.64 crore in the same period last year.

The freight earnings of April-July 2016 also missed the Budget Estimates by 15.27 per cent. Budget estimates for the current year pegged freight earnings at ₹29,681.61 crore for the April-July 2016 period.

According to data from the Ministry of Railways, the fall in freight earnings were driven mainly by a drop in revenue from coal transportation. Between April and July 2016, earnings from coal transportation fell 13.66 per cent to ₹14,757.75 crore as compared to ₹17,093.12 crore in the same period last year.

The total tonnage of coal transported by the Indian Railways during the period stood at 176.99 million tonne, a slippage of 15.14 per cent over the budget estimates of 192.13 million tonne. The coal transported during the period was also 1.68 per cent lower than what was carried in the same period last year.