Dipping coal sales halt Railways' freight march

Coal India Ltd's dismal output in August, its lowest in three years, is bad news not only for the country's mining behemoth but also for country's biggest transporter, Indian Railways.

With half of its freight movement dependent upon coal transportation, Railways is staring at goods trains lying idle impacting its revenues.

The prospect of dwindling coal demand impact its own revenues is so severe that Railways is now working for the first time to get into a legally binding contract with buyers of coal like power plants and also steel and cement to get assured offtake of rakes in exchange of freight discounts, a senior official of the Railway Board has revealed.

"Earlier Railways wasn't agreeing to any legally enforceable contract. The long term contract would be for about 10 years. The draft agreement is now ready, based on what the Railways minister had said in his budget speech. It is now going for discussion with the industries to know any safeguards that are needed. We hope to sign the agreement soon," the director said on conditions of anonymity.

While this gives Railways an assured cargo, it can, in exchange provide some discounts to consumers of steel, cement and other commodities on the freight rates, the official said.

With demand for coal faltering, it impacted demand for coal carrying wagons supplied by the Railways, a key component of its revenues.

In August, Coal India's production touched a nadir, dropping 10.4% on year to 32.4 million tonne against a target of 40.89 million tonne.

This has led to Coal India going back on its earlier projections of wagon demand.

"Coal India had projected 245 rakes a day and we are ready with that. But they could do only with 207 rakes a day from April to August. While the current supplies are higher than previous year's level of 213 rakes a day, this is much lower than what they had projected at the beginning of the year," a senior official of the Railway Board said.

Demand for coal carrying goods trains would go up once the three projects being executed as a joint venture between the Railways and Coal India get executed by December 2018 providing last mile connectivity to distant coal mines.

"The Odisha line would be ready by March this year. The work in now at the last leg. The Jharkhand project is expected to get completed by June 2018 followed by the Chhattisgarh project in December of that year. These lines are capable of carrying 30-35 million tonne of coal if a single track is laid," the official said.