Railways Freight Revenues to be hit on declining Coal Traffic; registers 2.15% dip in Dec

Indian Railways registered a 2.15% dip in December revenue earning to Rs.9,240 crore, compared with Rs.9,442.32 crore in December 2015

NEW DELHI: The government’s move to rationalize linkages for coal-fuelled power projects and a fall in imports may further exacerbate Indian Railways’ declining freight revenues.

The National Democratic Alliance (NDA) government last year started rationalizing coal linkages which reduced the distance coal has to travel from a coal mine to the power plant. This resulted in savings for electricity generators such as NTPC Ltd.

Indian Railways registered a 2.15% dip in December revenue earning to Rs9,240 crore, compared with Rs9,442.32 crore in December 2015. The volume of coal transported in December 2016 saw a 4% dip to 48.76 million tonne (MT) as compared to corresponding period in 2015. This led to a 3% drop in coal freight earnings for December to Rs4,240.22 crore.

“Coal transportation has been sluggish till December but has picked up in January. We are trying our best to bring it to last years’ level by end of the financial year,” said a railway ministry official requesting anonymity.

Coal accounts for around 65% of the freight moved by the national carrier.

“There is still a quarter of financial year to go and we are hopeful of meeting our revised estimates target for coal freight,” said railway ministry spokesperson Anil Saxena. He added that coal freight has started picking up in January this year.

Of India’s installed power generation capacity of 3,10,005 MW, 61% or 1,88,968 MW is powered by coal.

Weaker demand for the fuel from generation stations too contributed to the sluggish coal transportation. Monthly coal production, which had reported contraction for the three months from August to October, rebounded in November with a 5.3% growth over the year ago period and sustained a 4% jump in December due to cyclical winter demand.

“We are seized of the issue and are looking at ways and means to correct this. It can’t be that we are dependent upon one commodity to earn our freight revenue,” said a railway ministry official requesting anonymity.

The railways has been trying to expand the list of commodities it services—increasing it to 40 by including automobiles, packaged consumer goods, cotton, fruits and vegetables.

Experts remain circumspect about the railways’ freight growth plans.

“The railways was saved in the last financial year by the coal movement. With coal movement collapsing this year and Central Electricity Authority categorically stating that India doesn’t require any thermal power plant till 2022 the Indian railway freight growth story is in serious trouble,” said former Indian Railways’ Accounts Service officer Akhileshwar Sahay.

Last August, Indian Railways raised the freight rates by 8-14% for transporting coal between 200km and 700km and lowered it by 4-13% for distances above 700km. Freight rates for distances up to 200km were kept unchanged.

The national carrier is planning a capital expenditure of around Rs1.3 trillion for the financial year 2017-18, the highest-ever capital outlay and is expecting a gross budgetary support of around Rs55,000 crore from the finance ministry. This will be for the first time that a combined budget will be presented on 1 February after the merger of railway budget and the Union budget.