The railway ministry on 23-08-2016 revised freight rates for coal, leading to an increase in transportation cost for plants located 200-700km away from the mines and a reduction for those situated further away.
While the private sector power producers said it will raise power generation costs for several plants, the railways maintained the exercise was revenue-neutral for the national carrier.
According to Railway Board member (traffic) Mohammad Jamshed, the freight rates were raised by 8-14% for transporting coal between 200km and 700km and were lowered by 4-13% for distances above 700km. Freight rates for distances up to 200km were kept unchanged.
While an official with state-run power producer NTPC Ltd said on condition of anonymity that the increase "may not lead to a drastic rise in power generation cost", private power producers said the new freight rates will warrant a power tariff increase.
"During a railway board meeting, it was decided to rationalize the coal tariff by changing the distance slabs. This revised freight rate is applicable from today," said Jamshed. He added that the tariff revision will make coal transportation from mines cheaper over long distances.
"About 60% of the power plants in India need to transport coal for 200-700km, where there is an increase in the freight rate. For them, there is a likely cost increase of 6-7 paise per unit of power. For the others, the impact is negligible," said Sushil Maroo, executive vice-chairman at Essar Power Ltd.
According to Lalit Jain, group chief commercial officer of Hindustan Power Pvt. Ltd, the rail freight rate increase including the additional coal terminal surcharge of Rs.55 a tonne on loading and unloading will warrant an increase in energy tariff from coal-based power plants by 8-10 paise per kilowatt hour.
"This is yet another increase for coal-based power plants after the recent increase in clean energy cess and coal price which shall further increase end user power cost. Inability to pass on such tariff shall further deteriorate financial condition of distribution companies and power generators," said Jain.
An official with NTPC said the utility was in the process of figuring out impact of the changes.
"The changes, we believe, have been carried out with the intention that power generation cost should not go up drastically," said the person, who asked not to be identified.
Jamshed of Indian Railways said the rate revision was revenue-neutral for the national carrier because the hike for some distances is being complemented by the tariff reduction on long routes.
"We are trying to encourage long-distance coal freight through this move, and it will benefit several industries and thermal power plants," said Jamshed adding a coal terminal surcharge at the rate of Rs.55 per tonne at both the loading and unloading terminals for traffic of coal for the distance beyond 100 km will also be levied.
According to the railway ministry, more such steps are on the anvil in the near future through innovative schemes such as liberalized station-to-station rates, long-term tariff agreements at pre-determined price escalation principles and further liberalized empty flow direction policies.
Jain of Hindustan Power said the burden of Railways' resource mobilization should be shared by every one and not just the stressed power sector.