Coal India looks to cut power producers’ transport costs

Coal India plans to rationalise supply sources for private power producers to reduce the distance over which coal is carried in an effort to cut transport and generation costs. The state-run monopoly will soon invite private generators to participate in the scheme.

A similar exercise was undertaken for state-run power units two years ago, aiming to reduce costs by almost Rs 6,000 crore by feeding each plant with coal from the closest mine instead of transporting it over long distances.

At present, the coal supplied to generation plants is not necessarily from the nearest mine. According to Coal India executives, coal travels about 477 km on average from pithead to destination. The aim of the exercise is to reduce the distance as much as possible.

“The plan is to change the source of coal for as many independent power producers as possible, keeping the quality of coal at the same level.

This is expected to reduce the distance over which coal has to be sent, thus reducing transport costs, which in turn would reduce the cost of generation and finally, electricity bills for consumers,” said a senior Coal India executive.

“The scheme is voluntary — power companies need to opt for it. It will also depend on the availability of coal at a mine and the readiness of the consumer to accept the quality of coal offered. An inter-ministerial task force has been formed to oversee the scheme and sort out issues,” he said. The supply revamp for state-run utilities was executed in six sets.

Coal India Ltd