The Hindu Business Line : Coal cos fear loss of long-distance consumers

THE state-owned coal companies and bulk coal consumers in the core and non-core sectors are upset with the Railway Minister's proposal to increase the coal freight by 0.83 per cent over the existing rates up to a distance of 700 km. The percentage of freight increase will be higher for movement over greater distances.

Though the actual impact of the landed cost of domestic coal to long-distance consumers is yet to be ascertained, it is feared that coal consumers beyond 700 km, particularly in the coastal areas, may find domestic coal costlier compared to imported coal. Coal companies which belong to Coal India Ltd (CIL) and its subsidiaries have a despatch target of more than 280 million tonnes of coking and non-coking coal in 2002-03 to core and non-core sector consumers, of which about 220 mt will go to the power sector. It is assessed that around 200 mt will be despatched to long-distance consumers, including consumers with a combined annual consumption of 75 mt who are located beyond 700 km.

It is being feared that, as a result of this, a section of long-distance consumers may switch over to imported coal. The Coal Consumers' Association of India said that the railway freight for coal has been increasing at a faster pace than the basic price of coal and was rendering domestic coal unattractive for long-distance consumers. The element of railway freight in power-grade coal had already increased from 43 per cent to 53 per cent of the landed cost at 750 km distance. In some major power stations in Gujarat and Maharashtra, the freight element on the landed cost of coal would be as high as 71 per cent. The proposed hike in the coal freight rate will not only affect consumers, but will also tell on the volume of coal traffic, the association feels.

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