Coal India Ltd proposes to build three new rail links having a total length of 350 km to connect its coal fields in the interiors. This could require an investment of Rs 2,000-Rs 3000 crore depending on the terrain.

“The new rail links would connect coal fields in the Ib Valley, North Karanpura and Mand-Raigarh coal fields,” Mr N.C.Jha, Chairman, Coal India, told Business Line. These coal mines are in Orissa, Jharkhand and Chattisgarh.

Sources in the Indian Railways said construction cost for a new rail line, excluding the land cost, ranges between Rs 5-7 crore a km in a flat terrain. However, in a difficult, hilly terrain the costs could shoot up to as high as Rs 20 crore a km.

“The new policy announced by Railways in February is quite favourable, even though we will not get back the interest (during construction) part,” Mr Jha said.

Funding

According to the Railway policy — that allows investments in coal and iron ore mine rail linkages — companies will have to fund construction of rail link along with land acquisition costs. But, upon construction, the ownership, operation and maintenance will be with the Indian Railways. On the revenue side, the entire freight earnings from the use of this link will accrue to the Railways.

Investing firms such as Coal India can recover their costs, through the levy of “surcharge” on the freight rates, over a 10-25 year period. Companies can recover the costs through development charges from various users of the line, or it can also be compensated by the Railways through levy of surcharge on customers till the applicant recovers the cost of original investment. But, the Railway Ministry is yet to finalise the model concession agreement for implementing the policy.

The Coal India board has already approved the 43 km rail link in Ib Valley. “We plan to lay a double line now,” Mr Jha said. In North Karanpura, a double rail link of 93 km has been proposed for which the company is seeking forest clearance from the Environment Ministry. The new coal field Mand-Raigarh is being linked to Korba coal field, which will be eventually linked to the Pendra Road-Amritpur line.

Coal has been facing problems with coal evacuation due to the shortage of rakes. In 2010-11, the company had some 71 million tonnes of coal piled up at the pit heads due to capacity constraints.

However, in April, the situation seemed to have improved as the Railways have increased the rake availability. “As against 158 rakes a day in April last year, we have received 181 rakes in April this year. There are signs of improvement, even though we are falling short by 10 rakes a day. Our offtake is up by 9.2 per cent. I expect that this year we will get more rakes going by the current trend,” Mr Jha said.

Production target

Coal India has set a production target of 452 million tonne (mt) for the current financial year and it expects to move a total of 477 mt, including the coal that has piled at its pit heads.

For the Railways, coal is a key commodity — accounting for 46 per cent of total freight loading and 38 per cent of total freight earnings.

(This article was published on May 4, 2011)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.