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Coal price pooling would erode railways' earnings in 2 years: CEA

Sudheer Pal Singh  |  New Delhi 

The government’s proposed pooling of domestic and international coal prices to make costly imports viable would erode Indian Railways’ freight earnings by Rs 2,200 crore over the next two years, the topmost power sector planning body said today.

Pooling will rationalise coal transport, bringing down the freight bill of coal companies, according to the (CEA).

Currently, state-owned Limited (CIL) supplies coal to across the country, irrespective of their location. Pithead plants account for 28 per cent of installed coal-based capacity, coastal plants account for 16 per cent and non-pithead non-coastal projects account for the 56 per cent capacity. Owing to domestic shortage, individual utilities resort to coal imports.

Once pooling comes into effect, imported coal will have to be supplied by to all the three kinds of stations. Movement of imported coal to new inland plants and movement of domestic coal of to existing coastal plants will lead to criss-cross movement.

To rationalise this movement by rail, CEA has proposed imported coal be supplied to new plants nearer to the coasts and import of coal for new plants near to mines be substituted by supply of domestic coal by be drawn from supply to the existing plants near to the coasts. This would result in a saving of Rs 445 crore and Rs 619 crore in 2013-14 and 2014-15 by rationalising rail transport by avoiding supply of imported coal to plants nearer to mines and Rs 570 crore by avoiding supply of domestic coal to power stations near to coasts.

“Therefore, the total freight saving in 2013-14 and 2014-15 works out to Rs 1,015 crore and Rs 1,189 crore respectively,” CEA has said in its report on pooling.

However, as the scheme of imported coal supply will jack up the cost of generation from coastal plants, the cost of imported coal to coastal pants will be brought in line with CIL’s price of domestic coal of similar quality. The cost differential will be recovered by across the board increase in the CIL price to linked consumers.The had last year asked CIL to supply at least 85 per cent of Annual Contracted Quantity (ACQ) of power plants commissioned after March 2009. However, the miner said it would not be able to meet more than 65 per cent of ACQ of plants.

Coal accounts for 40 per cent of railway freight earnings of Rs 68,600 crore.

Of this, it earns Rs 19,300 crore, amounting to 70 per cent of the coal traffic revenue, in transporting coal to power plants.

First Published: Thu, January 31 2013. 00:43 IST