"Extension of freight concession also to customers located in 701 to 1,400 Km could result in substantial domestic coal lifted by them in place of coal sourced from abroad due to lesser cost in coal conveyance," a senior executive of the company said.
State-owned CIL on Wednesday said it has sought 15 per cent distance-based freight concession from Indian Railways for transportation of domestic coal to customers located at a distance of 701 to 1,400 km from its mines.
The move is aimed at broadening the client base and bring in more customers under import substitution plans, Coal India Ltd (CIL) said in a statement.
“Extension of freight concession also to customers located in 701 to 1,400 Km could result in substantial domestic coal lifted by them in place of coal sourced from abroad due to lesser cost in coal conveyance,” a senior executive of the company said.
Out of 126 coal-based thermal plants linked with CIL, 14 plants located over 1,400 km distance are eligible for the freight concession presently. This prompted CIL to approach the railways to seek distance-based freight concession in a bid to bring in more customers under the ambit of the import substitution scheme, the statement said.
Close to 70 per cent of CIL’s overall supply consists of “G9 to G13” grades of coal for which the freight price is around 40 to 45 per cent of the total landed cost at consumption point.
For distance above 701 km the freight cost climbs up further. If concession in freight price is offered to customers falling in this range, it would be beneficial to coal producers to step up domestic supplies substituting imported quantities.
CIL’s coal would then be competitive with the landed price of imported coal and customers may opt for domestic coal. “The request is in line with the benefit given to iron ore,” the statement said.
This step by CIL comes in the wake of a recent Railway Board decision which granted a 20 per cent distance based concession in rail freight price for transportation of coal and coke, among other commodities, for distances in excess of 1,400 km.
The price of CIL’s coal is considerably low compared to imported coal. But statutory levies and rail freight makes the landed cost of its coal less competitive compared to imported coal, particularly in the western and southern parts of the country, the company said. Coal India accounts for over 80 per cent of domestic coal output.