Title - Fuel supply deals pose a challenge to Railways

FSAs (fuel supply agreements) being signed between power plants and coal companies are to change the present flow of the empties, as well as loaded rakes of the Railways. The Railways, used to dictating terms in this regard citing operational reasons, may now find itself increasingly pushed to a situation where it may have to accept such movement as was inconceivable to it earlier.

With FSAs coming into force, neither the Railways nor Coal India, it appears, will have much say in the way the movement takes place. When choosing collieries for sourcing coal, the power houses are likely to be guided by the consideration of coal quality in preference to distance. In other words, a power house may not mind “walking extra miles” and thus paying higher Railway freight for the right type of coal.

IMPORTING COAL COSTLY

Several power houses depend much on costlier imported coal. The Railways thus has to accept, to its chagrin, the haulage of the empties over long distances at a cost. The trend is already visible.

“We've become more customer-friendly now than before” observe Railway sources acknowledging the imperatives of the emerging scenario. “Also, the focus is changing.” Earlier, as it is pointed out, the emphasis used to be always on the volume of traffic handled; the present accent is more on NTKM (net tonne kilometre) — the parameter for judging the efficiency of a wagon.

Under the changing scenario, the Railways perhaps would like to see coal available at many more locations than at present to minimise cost. But then there is nothing much that can the Railways do in this regard. For example, NTPC's super thermal power plants were set up at pitheads with merry-go-round system to ensure seamless transportation of coal. However, the production of these mines having failed to keep pace with the rising coal demand, the STPPs now depend on supplies from outside and, in many cases, the Railway networks created in these plants for transportation of items other than coal, are now being used to bring in coal.

The present FSAs will cover power plants set up between April 2009 and December 2011. There are 49 such plants, both in the private and public sectors, and the FSAs so far cover 14 of them. Again, power plants that have not signed power purchase agreements (PPAs) are not eligible to sign FSAs. Most of the old State electricity boards are out of the purview of the present FSAs, but they need coal to maintain generation and will continue to need it no matter whether they are able to pay or not for the coal they buy. Importing coal which is at least 15 per cent costlier is out of question. Most State-level power generating companies together owe thousands of crores of rupees to coal suppliers — both public sector coal companies and private coal supplying firms.

The Railway sources concede that transporting coal, for example, from eastern coal fields to far off power plants in Punjab and bringing back the empties all the way may not be the most rational thing to do.

But then there is hardly any choice. Besides, some amount of “irrational movement” ingrained in our system is unavoidable in national interest.

For example, during the peak harvest season, lots of empties are moved into the northern region to facilitate loading and transportation of food grains, a low freighted item, often sacrificing more paying traffic elsewhere.

Under the new dispensation, the “irrational Railway movement,” if any, will be taken as fait accompli.