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With the Indian Railways facing network congestion from passenger volumes returning to pre-Covid levels, the Centre plans to evacuate more thermal coal through coastal shipping.
Building on shipping reforms made over the past two Union Budgets to boost coastal shipping, including a ₹10,000 crore viability gap funding for public-private partnership terminal projects and regulatory easing, the government has recently brought about a railway reform — telescopic rates.
Telescopic rates refer to bundling of bills of multiple freight trips into a single long trip, which brings the benefit of a longer journey to the final amount, reducing costs.
Movement of domestic coal from mines has been taking place through the rail-sea-rail (RSR) route in order to meet the demand of power plants. This involves movement of coal by rail in two legs — from mines to unloading port as first leg and from subsequent loading port to power plants as second leg.
“As policy, the charging of both the legs of rail transportation is done separately and independently. The matter regarding grant of telescopic benefit in freight rate by treating both legs of rail movement as one has been under consideration for some time. It has now been decided to permit telescopic benefit in freight rate to the coal traffic destined to the power houses transported through RSR mode from coal mines of Coal India and its subsidiaries/public-sector undertakings,” the railways said in a notification on February 25.
The programme is being run on a pilot basis for three years — the destination of the first leg will be a port on the eastern coast, whereas the originating point of the second leg will be a port on the southern or western coast. The destination of the second leg will have to be central and state gencos.
In the draft Coal Logistics Policy of 2022, the coal ministry found through case studies that the costs for first-mile and last-mile connectivity via rail on RSR routes constitute as much as 71 per cent of total logistics costs for the RSR route. Thus, railway tariff rationalisation for first- and last-mile connectivity to and from ports can enhance viability of RSR routes for coal.
The new setup will allow states to save over ₹10 lakh per rake on a 500 kilometre journey across both legs of the trip. This, officials said, will incentivise states to go for RSR over the all-rail route.
For example, a 200 kilometre trip from the mine to the port of loading for a single rake (59 wagons) would cost the central or state government ₹21.4 lakh. Similarly, a 300 kilometre stretch from the destination port to the genco by rail will cost ₹31.9 lakh per rake. This would total ₹53 lakh to the consignee.
Under telescopic freight, both trips would be treated as one, and the freight will be charged for one 500 kilometre journey, which is ₹42.3 lakh per rake, thus saving over ₹10 lakh in freight costs.
Coastal shipping of coal in 2023-24 was 54 million tonnes (mt), double of what it was in 2021-22. While specific data for coastal shipping of coal is not available yet for 2024-25, coastal shipping for all commodities at major ports (owned by the Centre) has increased by 5 per cent this financial year to 176 mt.
A FRESH ANCHOR
* Govt is building on recent reforms to boost coastal shipping
* Movement of domestic coal from mines has been taking place through the rail-sea-rail route in order to meet the demand of power plants
* Programme is being run on a pilot basis for three years
* The new setup will allow states to save over ₹10 lakh per rake on a 500 km journey
* Coastal shipping of coal in 2023-24 was 54 mn tonnes
