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The freight hike bullet has once again bitten the power and steel companies, which are already fighting stressed margins. Railway Minister Pawan Kumar Bansal announced increase in freight by 5.79 per cent for coal, iron and steel. These revised rates would be applicable from April 1.
“The increased cost of freight would translate into 1 to 2 per cent increase in cost of electricity generation for every unit,” said Abhaya Agarwal, Partner-infrastructure practice, Ernst & Young.
India has 121,610.88 MW of coal-fired generation capacity as on January 31. This is 57.4 per cent of total installed capacity of 211,766.22 MW.
The power producers using domestic thermal coal as fuel will have to pay higher transportation charges that would result in higher generation cost for every unit of electricity. Similarly, steel manufacturers would see an increase in transportation cost of both iron ore (raw material used in steel production) and finished products.
NTPC would bear an additional cost of about Rs 200 crore for transport of nearly 70 million tonnes of coal by Railways. It would translate to around 1 per cent per unit increase in generation cost, said a senior official at NTPC.
In 2011-12, Coal India ferried 229 million tonnes of its total production of 435.84 million tonnes through Railways. On average, nearly 52 per cent of domestic coal production is transported through rail links.
Coal India targets an increase of 8-9 per cent in its production. This would translate into 11-12 per cent more transportation by Railways, say industry watchers.
However, the increase in freight would not impact Coal India, as it is passed on to the buyers, said S. Narsing Rao, Chairman and Managing Director of the public sector miner.
RETAIL PRICE OF PETROLEUM PRODUCTS
The Railway Minister has also increased ferrying charges for diesel and kerosene by 5.79 per cent. More than 30 per cent of petroleum products are transported through Railways.
This would impact the retail prices of the commodities. However, it is yet to be seen how much of it is passed on to customers.
Makrand Nene, Director (Marketing) at Indian Oil Corporation Ltd, indicated that there would be impact on the prices, which may lead to increase in under-recoveries.
However, Nene did not divulge any exact figures saying it is too early to get into any conclusion.
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