The recently announced draft National Coal Logistics Plan emphasizes the development of the country’s coastal shipping network, especially along the south and west coasts, to reduce freight costs and delivery times of coal. key product, the mainstay of India’s power generation. “Rail-Sea-Rail options for coal traffic on the south and west coasts should be adopted to reduce the total landed cost of supplying coal to these regions. Investments in port capacity and the railway lines of the last section are envisaged,” the plan suggests.
According to a 2018 Crisil report, transmission accounts for 25-35% of the cost of electricity produced by a plant located about 1,000 km from the coal mine. In addition, coal accounts for almost half of the railroad’s total freight basket.
Welcoming this development, analysts pointed out, coastal cabotage not only requires more research and feasibility studies, but also investment in rail and port infrastructure. CUTS International Executive Director, Bipul Chatterjee, points out: “It is necessary to have a pilot project to understand the dynamics. In addition, a study on the infrastructure needs of ports and railways should be undertaken. »
“Given the congestion of the road and rail network, particularly railcar traffic, the plan looks positive. But the factor to bear in mind is that a large part of the railways’ revenue comes from coal,” he added. “So for the power plants, the cost of transporting coal will be less, but the railways could suffer,” he said, adding “I think overall it will reduce costs, which which will ultimately benefit the consumer as electricity costs will go down.” .” DAM Capital Advisors Senior VP Mohit Kumar said the main concern here is connecting infrastructure. “It should happen as soon as possible. The sooner it is built, the better the window it offers stakeholders to realize its potential over the next 20 to 25 years. Another problem is keeping in mind the location of ports in relation to mines,” he added. Port investments are important in the sense that they are not very important, Kumar said, adding that port investments are more about investing in connecting mines by railway lines to ports. For example, in Mundra, there is a long coastline. Thus, setting up a port for coal handling should not be a problem.
Dedicated freight corridors
The benefits of coastal coal transport should also be analyzed in light of the railways’ establishment of dedicated high-speed freight corridors (DFCs). Saurabh Bhatnagar, EY India Partner and Head of Metals and Mining Consulting, points out that DFC offers to significantly reduce rake transport time and reduce logistics costs by around 30%.
For example, the distance between Talcher in the east and Ennore in the north of Chennai is almost 1,400mm, the transport rates currently being around ₹2,400 to ₹2,500 per ton and they are expected to reduce by 25 to 30% per ton via DFC, with travel time being 20-30 hours.
“The road-rail-sea-rail-road mode for such cabotage links along the east coast can take significantly longer due to multiple handling and sea travel time, with marginal economic gains compared to the DFCs,” Bhatnagar explained.
“However, transporting coal mines in the east to power stations in the west, cabotage may be a more feasible and cost-effective option. But, for this to happen, port coal handling capabilities under the Sagarmala project will need to be significantly upgraded and modernized,” he added.
July 10, 2022