In talks with Railways to acquire 2,000 wagons to move the fuel
New Delhi: Coal India is in talks with the Indian Railways for an investment of ₹5,000 crore to procure wagons that carry coal. This could end up being the single largest investment by a railway customer for procuring wagons.
This is the first time that Coal India, which has cash reserves of ₹59,000 crore as on September 2014, is investing in railway wagons, though earlier it had invested in rail link infrastructure. For fiscal 2015-16, Coal India has a target of investing ₹6,000 crore to ramp up mine infrastructure and railway connectivity.
“The specific terms and conditions of the scheme are being worked out…It entails an investment of ₹5,000 crore,” Ajay Shukla, Member-Traffic, Railway Board, told.
“Coal India had approved a plan to acquire 2,000 railway wagons in December, with a total plan to procure 9,500 wagons. While there is no specific design change that has been sought, the 2,000 wagons will be solely used for Coal India’s transportation needs,” a senior Coal Ministry official said.
The move is good news for wagon players. “Each coal wagon costs about ₹35-40 lakh depending on whether it is a top discharge or a bottom discharge wagon. This is without taxes,” said Naresh Kumar, a former Railway official, with experience in the wagon industry. Kumar now runs a start-up Techlog Support Services.
The Railways has wagon investment schemes that allows customers to invest in rolling stock and get some freight discount, among other benefits, over a long period of time. There have been investments by petroleum product companies, mining firms and cement firms in such schemes, but Coal India’s investment may end up being one of the single largest deals. The Coal Ministry official did not reveal whether there will be any freight discount.
Annually, Coal India transports 250-260 million tonnes of coal through Indian Railways, roughly half of its production. In 2014-15, the Railways carried a total of 545 million tonnes of coal in 2014-15, accounting for almost 50 per cent of the 1,097 million tonnes of its freight carried during the year.
Earnings from coal transportation accounted for about 47 per cent of total freight earnings of railways. With an average wagon life of about 30 years, the Indian Railways has a wagon fleet of 2.45 lakh wagons, of which about 1.4 lakh wagons are open wagons that are usually used to carry coal.
According to a senior Coal Ministry official, the state-owned miner had approved a plan to acquire 2,000 rail wagons in December 2014, with a final goal of procuring 9,500 wagons.
“While there is no specific design change that has been sought, the 2,000 wagons will be solely used for Coal India’s transportation needs,” he said.
“Coal wagons cost about INR 35-40 lakh each, depending on whether it is a top or a bottom discharge type,” said a former Railway official.
CIL transports 250-260 million tonnes per annum (mtpa) of coal through rail, which is roughly half of its production volume.
The Railways carried a total of 545 mt of the dry fuel in FY15, accounting for almost 50% of the 1,097 mt of freight it moved during the year, and 47% of its total freight earnings during the period.
This development comes even as CIL customers feel that imported coal with high energy content works out cost-effective to a large number of thermal power plants as compared to the fuel bought from CIL.
This is primarily due to a 55% drop in international prices over the past six years. On the other hand, the state-run miner’s prices have increased, along with freight and other levies.
A senior official said that “Imported coal with very high energy content from Indonesia is arriving at NTPC’s Simhadri plant at a total cost of INR 6,500 per tonne, including freight, duties and logistics costs, while that at Farakka it is around INR 5,500 per tonne, and at Kahalgaon it is INR 6,000 per tone.”