The government can reduce rail freight for coastal transport of coal

The Center is considering lowering rail freight rates for thermal coal transported via coastal transport by changing the Rail-Sea-Rail (RSR) method of pricing. BLiTZ received this information. With coal demand expected to increase significantly in the coming months, the center intends to increase coal supplies while relieving pressure on the rail network and keeping sea coal costs under control.

This also comes after Finance Minister Nirmala Sitharaman made clear her intention to boost coastal shipping in her speech on the Union budget for 2023-24. Subsequently, the Department of Railways and Ports, Shipping and Waterways will shortly hold a meeting with high-level stakeholders to develop a roadmap for the introduction of “telescopic rates” for coastal transport of coal.

But it’s still a work in progress. Sources say the government is urging the new policy to be implemented ahead of the upcoming heavy consumption season, as it wants to avoid a repeat of last year’s coal supply-demand crisis.

Telescope freight, which is the journey from coal mine to port and then from destination port to power plant, is treated as one shipment, reducing the final freight cost. Currently, the freight for rail transport from mine to port and from destination port to power plants is charged separately, which is very expensive.

The policy is met with resistance from the Ministry of Railways, which must reckon with a loss of revenue if telescopic fees are charged for rail transport in coastal shipping. BLiTZ had reported that last year the NITI Aayog had asked the railways to consider reducing the freight for transporting coal.

Sources said the railroads are not interested in proposals to reduce base freight loads because coal transportation is the railroads’ main source of income. Coal accounts for more than half of the roughly 1.65 lakh crore (estimated for FY2023) freight revenue for the railroads.

Source: News Network