How Visakhapatnam Port Trust could woo back TANGEDCO to ship coal

P Manoj Mumbai | Updated on November 08, 2019 Published on November 08, 2019

State-run Visakhapatnam Port Trust (VPT) has managed to woo back one of its top customers - Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) – which had switched loyalties since March this year to Paradip Port Trust, also state-owned, for shipping coal sourced by the power utility from the Talcher and Ib Valley coal mines of Mahanadi Coal Fields Ltd in Orissa.

The issue demonstrates how ports such as VPT, gear up for competition to retain cargo.

At stake was 2.398 million tonnes per annum (mtpa) of thermal coal that TANGEDCO wants to move through a rail-cum-sea mode from the mine heads in Jharsuguda district.

For 35 years, TANGEDCO has been using VPT to ship the thermal coal arriving on rail wagons from the Talcher and Ib Valley collieries. The power utility had hired a logistics provider/handling agent for transporting the coal from the mines to VPT on open wagons, stacking at designated storage location, shifting coal from stack yard to the berth and loading onto ships nominated by TANGEDCO.

From March 1 this year, TANGEDCO stopped shipping coal through VPT citing high costs associated with the exercise and said it was weighing other cost-effective means for moving coal.

A part of the coal is now transported directly by rail to the Mettur Thermal Power Station, for which the cost of coal and railway freight is paid by TANGEDCO.

TANGEDCO said it has already started movement of Talcher/Ib Valley coal by rail-sea mode through Paradip Port Trust and was “exploring the option of movement through private ports also”.

VPT said that the coal movement of TANGEDCO through the port had dropped from 3.47 mtpa in 2016-17 to 1.85 mtpa in 2018-19 and the coastal movement has completely stopped from March 2019.

To retain the business, VPT offered a “cost-effective solution” to TANGEDCO for coal movement which involved receiving coal rakes at the port, unloading coal at the designated rail siding, movement of coal to stack yard, from stack yard to berth, heaping of cargo and loading onto vessels.

VPT floated a tender to engage an agency to provide the service to TANGEDCO in which the lowest price quoted was Rs 190.80 per ton. VPT added another 5% or Rs 9.54 per ton for management and general expenditure to the lowest bid and offered a rate of Rs 200.34 per ton to TANGEDCO.

The 5% management and general expenditure was subsequently dropped by VPT with the approval of its board of trustees following a request from TANGEDCO and a memorandum of understanding (MoU) was signed between VPT and TANGEDCO on August 02, 2019 to resume the service at Rs 190.80 per ton, which will be collected from TANGEDCO and paid to the handling contractor hired by VPT.

VPT will, however, earn vessel related charges, wharfage and storage charges as per rates approved by the regulator for the cargo shipped by TANGEDCO.

“Recognising that the tariff sought for approval is to bring back the cargo which has been moved away from VPT and the proposed rate is prima facie agreed by TANGEDCO, this Authority is inclined to approve the revised proposed rate of Rs190.80 per tonne,” the Tariff Authority for Major Ports (TAMP), the rate regulator for the 11 major port trusts, wrote in a October 30 gazette notification on the proposal.

Published on November 08, 2019

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