The Railways has got a deemed licensee status to transmit power, a move that will help it curb mounting electricity bills. This will also help it average out the cost of buying power, as it will be able to get better rates while procuring power from States that have surplus power.

At present, the Railways, which has a network spanning over 65,000 route km, is required to buy power from discoms, which are usually state electricity boards. The cost of procuring that power varies widely across States — from ₹4 to ₹9 a unit. In 2013-14, the average cost was at ₹6.45 a unit.

“With the Power Ministry recently clarifying that we have the deemed licensee status to transmit, distribute and trade power, we can now buy power directly from states that have surplus power and are offering lower per unit rates,” said an official.

Prior to this development, whenever the Railways network in a certain state tried buying power from a neighbouring state that offered lower cost of power, it was required to go through the discoms of the resident state. And the surcharges were so defined that the Railways did not benefit , said a source.

Renegotiating deals

However, implementing this move will take a while as the Railways needs to renegotiate many power purchase agreements.

States such as Madhya Pradesh, Gujarat, Odisha, Chhattisgarh and Haryana have surplus power. Even many States that have deficit power prefer to opt for power cuts to households in order to supply power to the Railways. This is because the Railways pays higher per unit charges compared with households. Also, it buys more power at night, when the demand is usually low, said a source. The average per unit rate at which the Railways buys power has shot up by over 46 per cent over the last five years — from ₹4.4 a unit in 2009-10 to ₹6.45 a unit 2013-14. Its total electricity bill is expected to touch ₹10,880 crore in the current fiscal, up 12 per cent over the last fiscal. Increasing fuel cost is a key challenge for the Railways.

In 2013-14, the Railways’ total fuel cost shot up to ₹28,471 crore, up 28 per cent over last year. The total fuel increase was contributed by a 37 per cent hike in the diesel bill and a 12.5 per cent rise in electricity costs in 2013-14.

The Indian Railways carry 20 million people and 2.9 million tonne of cargo a day. They use a mix of diesel and electricity to fuel the engines.

From the 65,000 route km network, the Railways have electrified 37 per cent of routes.