How inadequate rail network holds up economic activity

Some 17 million tonnes of coal are lying on the ground at Mahanadi Coalfields, a Coal India Ltd subsidiary in Orissa. At a power plant, they could generate enough power to light up a city the size of Delhi for about eight months. It’s not an unusual sight: coal piled up for kilometres along railway lines near coalfields, waiting for the train – if there is one. At any given point in time, enough coal is piled up to power an entire state for almost a year.

S. Narsing Rao, Chairman and Managing Director of Coal India, which produces some 80 per cent of the coal mined in the country, says new railway lines could make a 300-milliontonne difference to the annual coal supply. “All we need to be self-sufficient in thermal coal is just three railway lines of a little over 300 km of additional rail connectivity,” he says. He is alluding to a 100-km stretch in Jharkhand, a 50-km link in Orissa, and a 180-km one in Chhattisgarh.
coal-iron-ore505_022313065527It is ironic that shifting a resource from the point of production to the consumer is an issue in the country with the world’s fourth largest coal reserves and sixth largest iron ore reserves. India is the world’s third largest producer and consumer of coal.

The impact on power generation is a stark example of how the inadequate rail network holds up economic activity, but it is just part of the picture. According to ICRA Management Consulting Services (IMaCS), the power sector accounts for 70 to 72 per cent of the country’s total demand for coal, steel for 11 per cent, and cement for five. Most of the demand for imported coal comes from power and steel. Of Coal India’s supply, approximately 72 per cent goes to the power sector, one per cent to steel, and 1.5 per cent to the cement industry. About a quarter of the supply goes to industries such as brick-making, fertilisers, and paper.

A railway official who does not want to be identified says coal is not the only commodity to suffer transport bottlenecks. “We also have steel, iron ore, foodgrain, fertilisers and several other items,” he says. However, he adds that the issue is not just of adding a line, but of continuous investment in strengthening the railway network so it can handle bigger loads. “Without strengthening the network, adding a line only means adding a bottleneck,” he says.

Amar Singh, Chairman and Managing Director, Food Corporation of India (FCI), says connectivity is not the problem. “About 90 per cent of foodgrain movement is by rail,” he says. But FCI faces a crunch between October and March, when demand from other commodities such as fertilisers, cement and coal, rises. More importantly, poor facilities hamper operations. Singh says loading and unloading require a paved platform with good lighting, security and space for trucks. The lack of some of these features increases the loading or unloading time by 25 to 50 per cent. Because Indian roads cannot handle huge vehicles with a capacity of 40 or 50 tonnes, trucks are usually of nine-tonne capacity, leading to congestion and gridlock.

C.S. Verma, Chairman, Steel Authority of India Ltd (SAIL), who also holds additional charge as the Chairman and Managing Director of the National Mineral Development Corporation, says the supply of iron ore is not the problem. He says India’s steel production – around 75 million tonnes – requires around 120 million tonnes of iron ore a year, and India produces 160 to 170 million tonnes of ore a year. “The problem is … how we dispatch the iron ore to the steel producer,” says Verma.

EIA_coal_trainThe lack of a sense of urgency may be only part of the explanation. Coal India’s Rao says the issue of rail connectivity was raised in Jharkhand as far back as 1999. Work began on new railway lines, and Coal India paid an advance to Indian Railways, but progress has been slow. The delay is not because of the railways alone, according to Rao.  “There has been a combination of factors, with issues of forest diversion, land acquisition, law and order problems,” he says. “It has taken 13 years and still it is nowhere near completion.”

In 2011/12, roughly half of Coal India’s annual supply of 443 million tonnes was transported by train. Another 26 per cent was transported by road. Another 18 per cent was moved using the ‘Merry-Go-Round’ system, which refers to exclusive rail services between a coal mine and power plant.

The remainder – less than three per cent of total supply – was transported by other means. As roads are far from adequate to haul large quantities of coal over long distances, the railways are the only hope