Coal India seeks relief in railway tariff amidst slump in coal imports

coal freight operations

Coal India Limited (CIL) has approached the government for a discounted railway tariff with respect to the transportation of domestic coal booked by consumers that will facilitate import substitution, amid rising concern over fall in coal imports due to COVID-19-led demand slump.

Coal India is primarily focusing on domestic coal-based power plants and non-power sector consumers who are importing coal. Between them, they imported around 150 million tonnes (MT) in 2019-20. CIL is planning to replace their supplies with domestic coal, which would help the coal major step up its coal sales.

They believe that the move would result in curtailing forex outgo arising out of coal imports and enable CIL to expand its supply volumes.

“Power Sector which makes up close to 80% of CIL’s total supplies is brimming over with nearly 50 MT of coal sufficient for 29 days of consumption ending May 2020. Already many plants have started restricting supplies from CIL further shrinking the despatches of coal companies. For the month of May, power sector lifted only around 75% of coal at 30.15 MT from the CIL sources, compared to what it did in the month last year, resulting in a 10.23 MT slide in supplies,” the coal PSU said.

“The company can work on supply-side improving facilities to our customers like reduction in reserve prices in auctions and liaising with Railways on their behalf. We can cater to the demand but cannot create it,” said an official of the company.

Thermal coal imports at India’s major ports witnessed a 35.94% decline to 12.29 million tonnes (MT) in the first two months of the current financial year, according to the Indian Ports Association (IPA).

Coking coal imports witnessed a dip of 24.05 per cent to 7.47 MT in April and May this year.

The ports had handled 19.19 MT of thermal coal and 9.84 MT of coking coal, respectively, in the April-May period of the previous financial year.

The IPA in its latest report said “percentage variation from the previous year” in thermal coal handling was at 35.94% and 24.05% in coking coal.

Ratings agency ICRA in a report a month back had noted that while all cargo segments are vulnerable, the container segment is expected to be more adversely impacted.

While general cargo throughput may witness 5-8% contraction for the full financial year 2020-21, the container segment is likely to drop 12-15%.

The demand for coal depends on many factors like logistics, freight movement, fluctuation in international prices and most importantly, the working capital liquidity of the consumers.

The 12 major ports of India at Kandla, Mumbai, JNPT, Mormugao, New Mangalore, Cochin, Chennai, Kamarajar (Ennore), V.O. Chidambaranar, Visakhapatnam, Paradip and Kolkata (including Haldia) — handle around 61% of the country’s total cargo traffic.

In the last financial year, these 12 ports had handled 705 MT of cargo.

These ports, where operations have been severely affected due to the coronavirus pandemic, recorded a 22% decline in cargo handling to 92.82 MT during the first two months of the current financial year.

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