CIL wants to extend freight concession for coal

Railways demand 15% lower tariff for the transportation of 701-1,400 km of coal from mines.

News Delhi (Natural Energy News): Coal India Limited (CIL) has sought a freight concession of about 15 per cent for the facility of domestic coal transportation booked by customers located 701-1,400 km from its mines under the import substitution scheme.

The move will help broaden CIL's customer base by bringing more consumers under the import substitution scheme. The request is consistent with the benefit given to iron ore, the company said.

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This move of CIL has come in the wake of the recent decision of the Railway Board, in which a concession was given on the basis of a distance of 20 per cent in the railway freight price for transportation of coal and coke, which, among other items, was more than 1,400 kilometres. The distance was meant to transport coal and coke. A press statement issued by CIL.

The concession is at the normal tariff rate (NTR). However, after implementing the concession, the cost of goods should not be less than NTR for distances up to 1,400 km. The freight concession applicable from July 1 will be valid till June 30, 2021.

A senior executive of the company said the expansion of shipment accommodation to consumers located 701-1,400 kilometres from the mines may result in the lifting of enough domestic coal in place of coal abroad due to low cost in coal mining.".

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CIL's coal will then be competitive with the price of imported coal land and customers can opt for domestic coal.

The country currently imports 240 million tonnes (mt) of coal.

Of the 126 coal-based thermal plants associated with CIL, 14 are located over 1,400 kilometres as customers and are currently eligible for freight concession. “This prompted CIL to approach the railways for taking a freight concession in the distance of 701–1,400 km to bring more customers within the ambit of the scheme. If this happens, it will be a bullet in the arm for CIL, which will be in efforts to replace imported coal with its own yield.

Around 70 percent of the company's total supply is G9 to G13 grade of coal, for which the total consumption of goods is 40–45 percent at the consumption point. With a distance of more than 701 km, the freight cost increases further. If customers in this range are given a concession in the price of goods, it would be beneficial for coal producers to increase domestic supply, replace imported quantities.

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While CIL's coal prices are significantly lower than imported coal, statutory levies and rail freight make their estimated cost of coal less competitive than imported coal, especially in the western and southern parts of India.

The company is trying to take high-grade coal from select subsidiaries to coastal consumers and is targeting import substitutions of 70-80 mt in southern and western parts of the country.

The company recently launched a special spot e-auction scheme for coal importers with a view to increasing sales and reducing the country's dependence on imports.

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