Coal drives Railways' freight biz as demand from power plants perks up

Coal movement through rail mode has surpassed 2019 levels. Coal loading stood at 131.4 million tonnes (mt) in the current financial year till June 15, according to the data compiled by the Ministry of Railways. This is a little over 1 per cent increase over the same period in 2019.

As power plants rush to hoard coal ahead of peak summer demand, coal production and its movement has also increased. The peak demand season will also coincide with the opening up of industrial and commercial activities across states which were under curfew due to the second wave of the Covid-19 pandemic.

The railway coal loading, however, had dropped 30 per cent to 90.5 mt because of 61 days of the national lockdown during the April 1-June 15 period last year. Coal loading in the April 1-June 15 period this year shows a 45-per cent increase over last year because of this base effect. 

Coal India's (CIL's) production in April-May 2019 was 91.88 mt, while offtake was 104 mt. Though its production at 84 mt and offtake at 109 mt in 2021 are still lower than the 2019 levels, this fall does not reflect in railway loading since the Indian Railways carries coal for other customers as well. 

CIL, however, increased its production marginally by 2.6 per cent in April-May this year and offtake by 38 per cent over 2020.

Along with this, CIL witnessed a 52.5 per cent increase in its e-auction coal sales in the first two months of the current financial year, over the corresponding period a year before. 

The increased demand for coal is linked to the summer demand from the power sector, which is preparing for a season of heightened electricity demand. 

Peak power demand rose 2 per cent in May this year over last year. As on June 15, the peak power demand of the country stood at 166 gigawatt (Gw), against 156 Gw last year on the same day.

The plant load factor (PLF), or the operating ratio of thermal power, has also witnessed a mega jump over last year. In March-April this year, the average PLF was 66 per cent, against 45 per cent during the same period in 2020.

Additionally, the demand is also increasing from several manufacturing sectors as states unlock industrial activity.

While the increased demand is helping CIL, it is not translating into revenue increase for the railways because of a marginal dip in earnings. Earnings for the railways from coal loading were Rs 7,414.5 crore during April 1- June 15 this year, against Rs 13,390 crore during the same period last financial year. 

According to officials in the know, the insufficient earnings from coal are because of some concessions given by the railways to make rail freight movement more attractive. The earnings are, however, even lower than Rs 13,488.77 crore in the same period in 2019-20.

Along with higher demand for coal, improved freight loading can also be attributed to better turnaround time of the railways, as freight speed doubled over the past 18 months.

According to official estimates, around four zones have registered an average speed of freight trains of even 50-plus kilometres per hour (kmph). “Due to geographical conditions, certain sections offer good speed to freight trains. An average speed of 45.6 kmph was registered in May 2021 for freight trains. This is 26 per cent more, compared to 36.19 kmph for the same period (of the previous years),” said an official statement.