High and dry

E. Kumar Sharma        Print Edition: March 17, 2013

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.

It 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.

Orient Collieries in Jharsuguda district
200 metres under the ground at Orient Collieries in Jharsuguda district, Orissa Photo:Vivan Mehra/www.indiatodayimages.com

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.

S. Narsing Rao, Chairman & Managing Director, Coal India Ltd
New railway lines adding up to a little over 300 kilometres could make a 300-mn tonne difference to the country's annual coal supply: S. Narsing Rao
The 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.

The need to strengthen the rail network is not only urgent but growing fast. To achieve its annual target of 615 million tonnes for the current five-year plan, Coal India will need to produce and distribute roughly an additional 180 million tonnes a year.

Fuel transportation needs will only increase. Industry estimates indicate that the country needs to increase its annual power output by between 12,000 and 15,000 MW every year.

Given that some 80 per cent of India's power is generated using coal, the additional demand for coal-based power works out to 10,000 MW, which means an additional output of 50 million tonnes of coal a year for power alone. "This year was an unusual year," says Coal India's Rao. "The railways put in their best and supported through better rake availability, and we may end the year by adding about 37 million tonnes." This addition would raise the total supply figure for 2012/13 to 470 million tonnes. But it is still far short of the five-year plan target. "Even at 45 million tonnes [addition in a year], we can barely meet the increasing demand, as there is a gap of about 150 million tonnes," he says. "We need to bridge this gap and add 50 million tonnes each year."

Girish Pillai, adviser (infrastructure) to the Indian Railways board, says: "We have a large shelf of sanctioned projects ... to be completed. There are approved projects worth over Rs 1,40,000 crore." Funding is a major issue, he says. To address this, the railways are working on new funding models, and announced a plan last December in which one proposal was that the consumer - the coal company in this case - pays to build the line. The average cost of laying a railway line is Rs 8 crore to Rs 10 crore per kilometre.

But the burden may have to be borne by Coal India, whose consumers are already bearing the cost of supply shortages. For instance, the Karnataka State Electricity Board, which depends on Mahanadi Coalfields for around 30 per cent of its coal supply, has to depend on expensive imported coal. The Tamil Nadu and Andhra Pradesh state electricity boards, too, are forced to rely on imports.

The Andhra Pradesh Generation Corporation (APGENCO, the state power generating company) for instance, is supposed to get half its coal from Mahanadi, and the rest from Singareni Collieries in Andhra Pradesh. But Mahanadi meets only about two-thirds of its commitment, says T. Prabhakar Rao, director for coal and logistics at APGENCO. His company has been importing around five per cent of its total requirement since 2008. "We have to resort to expensive coal purchases through the e-auction route at Singareni and through imported coal," he adds.

Because imported coal is of better quality, a million tonnes is equivalent to 1.8 million of domestic coal, but at nearly Rs 5,000 a metric tonne, imported coal costs almost twice as much as domestic coal. APGENCO's Rao says his company's import bill is around Rs 800 crore a year.

The demand for coal in coal-based power plants in India is estimated to grow seven per cent a year, and to exceed supply by 266 million tonnes in 2016/17, according to IMaCS. Although a large chunk of India's coal needs will continue to be met domestically, the share of imports is expected to increase to 27 per cent in 2016/17.

According to IMaCS, growth in demand for coal has outpaced production in India, and this, combined with the poorer quality of domestic coal and other factors, has meant that India's coal imports accounted for around 16 per cent of domestic consumption, up from 7.1 per cent in 2002/03.

Better railways could spur economic activity and cut import bills. But for now, millions of tonnes of coal wait by the train tracks.

  • Print

A    A   A