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Monday, July 23, 2018

‘Rationalised’ coal freight rate policy: ShippingMin for review

According to Abhaya Agarwal, Partner and PPP Leader at EY India, the coal haulage rates between 200 km - 700 km have been raised in the range of 7 per cent to 13 per cent as per August 24 circular of the Railway Board.

Written by Deepak Patel | New Delhi | Updated: January 1, 2018 9:18:45 pm
Railways, Freight, coal freight rate policy, Shipping Ministry, Business news, Freight rate, Indian Express The cost competitiveness that coastal shipment offers is huge when compared with rail i.e. coastal movement costs just 20 paisa per tonne, which is one sixth that of rail cost. (Representational)

(By Deepak Patel)

Ministry of Shipping has urged the Ministry of Railways to review its “rationalised” coal freight rate policy — which was issued on August 24, 2016 — as the traffic that was previously moving via rail-cum-sea route (RSR) has “now shifted to all rail routes”.

During the fifth meeting of the “Group of Infrastructure” ministers, which happened on August 3, 2017, this topic was discussed and it was decided that the Ministry of Railways “shall review the policy from the perspective of incentivising infrastructure sector in the country”. The policy that was issued on August 24, 2016, rationalised the coal freight rate structure that was applicable since April 1, 2015.

The August 3 meeting was attended by three ministers: Nitin Gadkari, Minister for Road Transport and Highways, Shipping and Water Resources, River Development and Ganga Rejuvenation; Piyush Goyal, Minister of State (Independent Charge) for Power, Coal, New and Renewable Energy and Mines; Harsh Vardhan, Minister of Environment, Forest and Climate Change. A month after the meeting, Goyal was appointed as Minister of Railways.

Senior officials of Ministry of Railways were present at this August 3 meeting. The minutes of the meeting state: “The Group was informed that the net result of the freight policy of Railways dated August 24, 2016, is that traffic that hitherto had been moving via RSR (Rail Cum Sea) mode have shifted to all Rail routes. It disincentivises movement via Rail Cum Sea Route and ultimately affect coastal shipments so as to Sagarmala initiatives. No changes have been effected by Ministry of Railways yet. It was requested that Railways may review its freight rates policy of August 24, 2016”.

The minutes of the meeting added: “Railways authorities shall review the policy from the perspective of incentivising infrastructure sector in the country. Honourable Minister Roads Transport and Highways shall write to Honourable Minister of Railways in this regard.” According to a senior government official, the railways ministry has been requested again after the August 3 meeting to review its coal freight rate policy, but no action has been taken as of now. Goyal and Gadkari did not respond to the queries sent by The Indian Express.

According to Abhaya Agarwal, Partner and PPP Leader at EY India, the coal haulage rates between 200 km – 700 km have been raised in the range of 7 per cent to 13 per cent as per August 24 circular of the Railway Board. “For haulage beyond 700 km, the rates have been reduced between 4 per cent – 13 per cent and this will greatly benefit the industries which are located beyond 700 km… and also the thermal power houses. Although the rates for haulage up to 200 km have been left unchanged,” Agarwal said.

He added: “It is of the opinion that the rate rationalisation will affect RSR movement to power plants which are located beyond 300 km from the port. Although, if larger capacity vessels are deployed, then there is a possibility that we can serve the power plants which are beyond 300 km too. Another aspect which is worthwhile to look upon is that the new power plants which are either proposed or under commissioning stages are located within 200 km of coast only. For eg. in Tamil Nadu alone around 14000 MW of power plants are under various stages of development and are located within 200 km of coast line, so the prospect of routing domestic coal through coastal shipping still holds lot of potential.”

Agarwal stated that the cost competitiveness that coastal shipment offers is huge when compared with rail i.e. coastal movement costs just 20 paisa per tonne, which is one sixth that of rail cost. “And with existing rail freight rates, coal movement through coastal shipping might not get affected too much but to harness the benefit of coastal shipping, it is imperative that the rail freight rate is kept abreast in such a way that it promotes and develop coastal shipping. Further, rail and coastal shipping shall be developed in synergies so as to bring logistic efficiency. Moreover, there is enough leg room available for both the transport mode to sustain together subject to meticulous infrastructure development at respective sector.”

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