Coastal shipment of coal in focus

Rishi Ranjan Kala | Updated on: Jul 10, 2022
Black Diamond  accounts for nearly half of the Railway’s total freight basket

Black Diamond accounts for nearly half of the Railway’s total freight basket

Rail-sea-rail options can cut costs and turnaround time of the key commodity

The draft national coal logistics plan announced recently, emphasises on developing the country’s coastal shipping network, particularly along the south and west coasts, to lower freight costs and delivery time of the key commodity, the mainstay of India’s power generation. “Rail-sea-rail options for south and west coast coal traffic must be taken up to decrease the total landed cost of coal supply to those regions. Investments in port capacity and last leg railway lines are envisaged,” the plan suggested.

According to a 2018 Crisil report, transportation accounts for 25-35 per cent of the cost of power produced by a plant located around 1,000 km from the coal mine. Besides, coal accounts for nearly half of the railway’s total freight basket.

Feasibility studies

Welcoming the development, analysts have pointed out, coastal shipping not just requires more research and feasibility studies, but also investment in railway and port infrastructure. CUTS International Executive Director, Bipul Chatterjee, points out, “There is a need to have a pilot project to understand the dynamics. Besides, a study on infrastructure requirements at ports and railways needs to be undertaken.”

“Given the congestion in the road and rail network, particularly wagon traffic, the plan looks positive. But the factor to be kept in mind is that a major chunk of Railways’ revenue comes from coal,” he added. “So, for power plants, the cost of transporting coal will be less, but railways could take a hit,” he said, adding “I think overall, it will reduce costs, which ultimately will benefit the consumer as electricity costs will come down.” DAM Capital Advisors Senior, VP Mohit Kumar, said the key concern here is the connecting infrastructure . “This should happen as soon as possible. The earlier it is built, the better window it gives to stakeholders for realising its potential over the next 20-25 years. Another issue is keeping in view the location of ports with respect to mines,” he added. Port investments are material in the sense that they are not very large, Kumar said adding that port investments are more about investing in connecting mines through railway lines to the ports. For instance, in Mundra, there is a long coastline. So, setting up a port for handling coal should not be an issue.

Dedicated freight corridors

The advantages of coastal transportation of coal also needs to be analysed in the light of Railways setting up high speed Dedicated Freight Corridors (DFCs). EY India Partner and Metals and Mining Consulting Leader, Saurabh Bhatnagar, points out that DFC proposes to cut rake transport time significantly and reduce logistics cost by around 30 per cent.

For instance, distance from Talcher in east to Ennore in north Chennai is nearly 1,400 mm, the transport rates being around ₹2,400 to ₹2,500 per tonne at present and they are likely to reduce by 25-30 per cent per tonne through DFC, with travel time being 20-30 hours.

“The road-rail-sea-rail-road mode for such connections through coastal shipping along the east coast may take much longer time due to multiple handling and sea voyage time, with marginal economic gains as opposed to DFCs,” Bhatnagar explained.

“However, transport from collieries in the east to the power plants in the west, coastal shipping may be a more feasible and cost-effective option. But, for this to happen, port handling capabilities for coal through the Sagarmala project will need to be significantly improved and modernised,” he added.

Published on July 10, 2022
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