State-run coal miners are spending Rs 15,000 crore on first mile connectivity, aiming to provide user industries adequate fuel, especially in rainy season
With as much as 130 GW of power plants running on dwindling coal supplies, and the average stock of coal in power plants being about four days as of Oct. 3, the issue of supply chain logistics for coal, especially in the monsoon season when transport of the fuel by road faces challenges, has taken centrestage again. In what is reassuring, however, state-run coal companies are in the process of implementing 39 first-mile-connectivity (FMC) projects, entailing an investment of around Rs 15,000 crore, to improve coal evacuation infrastructure and avoid such crises.
Coal India Ltd (CIL), which contributes about 80% of the domestic output, will be implementing 35 FMC projects with a capacity to evacuate 414.5 MT of coal per annum – this is about 64% of the company’s current production. For easier handling and transportation of the fuel from the pithead to its destination, the company will be spending Rs 11,500 crore on mines with a production capacity of 4 MTPA and above.
FMC projects involve transportation of coal from pitheads to dispatch points, necessitating creation of mechanised conveyor systems and computerised loading systems (SILOs). CIL aims to do away with the current system of ‘wharf wall loading’ by pay loaders — as it is prone to overloading or under-loading of wagons — entirely by FY24. This is expected to help the company save on diesel costs, demurrage and transportation charges, among other things. Many of these projects would also be deploying dust suppression technologies and lead to lesser transport of coal by road. Thus, construction of railway lines, rail sidings and coal handling plants (CHPs) at mines with rapid loading systems (RLS) are also a part of FMC projects. CHPs with SILOs and RLS would offer benefits like crushing and sizing of coal, and quicker and better loading of the fuel in precise pre-weighed quantities.
According to ICICI Securities, CIL spends Rs 3,400 crore on transport of coal annually, which can decline substantially with better FMC provided by mechanisation — CIL CMD Pramod Agarwal recently said that with auto-fuel prices rising to record levels, CIL had to shell out an extra Rs 700 crore on diesel in Q1FY22. It is estimated that better FMC will also help coal consumers save around Rs 2,400 crore every year which they pay to CIL as evacuation facility charges (Rs 50 per tonne).
Coal India has already commissioned FMC projects of 70 MTPA capacity [Kusmunda (50 MTPA), Lingaraj (16 MTPA) and Krishnashila (4 MTPA)]. Speaking to analysts in August, CMD Agarwal said another four or five FMC projects would come up this year, with most of them expected to be commissioned in FY23. Subsequently, another 14 FMC projects of 100 MT capacity, worth Rs 3,000 crore, would be taken up.
Major projects to further FMC include the Rs 725-crore Jayant CHP SILO (15 MTPA), the Rs 700-crore Dudichua CHP SILO (10 MTPA), the Rs 700-crore Gevra 5-6 CHP SILO (30 MTPA), the Rs 600-crore Magadh SILO (20 MTPA), the Rs 585-crore Nigahi CHP SILO (10 MTPA) and the Ananta CHP SILO (20 MTPA). Major RLS projects include the Rs 405-crore Sardega RLS siding (20 MTPA), the Rs 315-crore Lajkua RLS siding (15 MTPA) and the Rs 222-crore Gevra RLS siding (20 MTPA).
“Quality FMC will prove to be the tipping point as far as coal transportation is concerned, with its multiple benefits including less use of road networks, which would reduce emissions and help the environment, and savings on diesel costs,” a senior CIL official tells FE, adding that “it would be a win-win situation for the company, the railways and the consumers”.