Bloomberg News

Rail Bottlenecks Thwart India Efforts to End Blackouts: Freight

February 02, 2012

Feb. 2 (Bloomberg) -- India, reliant on coal for more than half its electricity, is struggling to ease blackouts as delays in adding railways hinder fuel supplies and discourage investors from building $36 billion of power plants.

Many Indian mines are operating at one-third of capacity as the rail system can’t move more cargo, according to Alok Perti, secretary at the coal ministry. He didn’t give a precise number. Shipments from Chhattisgarh and Orissa, among the nation’s biggest coal-producing states, for instance, mainly use a single trunk line that also handles passenger services.

“The problem is quite severe,” Perti said Jan. 31. “We are constantly pushing the railways to expand their network.”

State-controlled Coal India Ltd., the world’s biggest producer, has been seeking construction of at least four railway links for as many as six years, which it has said will ease congestion and enable a 66 percent increase in output. Concerns about coal supplies contributed to Reliance Power Ltd. and Adani Power Ltd. delaying new power stations, even as the country contends with a 12 percent shortfall in generating capacity.

“There is no point talking about increasing production if there are no railway lines to ship the coal,” said Nirmal Chandra Jha, who retired as Coal India’s chairman on Jan. 31.

The company has asked Indian Railways to add two dedicated links in the eastern state of Chhattisgarh. The state is home to the Gavra mines, which accounts for more than 11 percent of the nation’s coal output. The miner is also seeking a 93-kilometer track from Hazaribagh in Jharkhand state and a 52-kilometer link from Jharsuguda in Orissa, where coal reserves were first discovered in 1900.

Rail Minister Dinesh Trivedi declined to comment when asked on Jan. 31 about the likelihood of the new lines being built.

Asia’s Oldest

The railway needs to ease congestion by increasing capacity on existing lines, possibly by adding more tracks, he said. Coal accounts for about 45 percent of goods carried by Indian Railways, the oldest network in Asia.

India has added only an average 180 kilometers (112 miles) of railroads every year since gaining independence in 1947, according to the rail ministry. The nation currently has about 65,000 kilometers of track network. By comparison, China plans to expand its network to 120,000 kilometers from 91,000 kilometers in the five years ending 2015.

India’s coal-hauling bottlenecks have contributed to power producers asking the government for help in securing more supplies, said Ashok Khurana, director general of the Association of Power Producers. The country is the world’s third-largest coal consumer.

Seven Days’ Fuel

Almost half of India’s 89 thermal power stations have less than seven days’ supply of fuel, according to the Central Electricity Authority, a government agency. Of the facilities, 67 depend entirely on railways for coal shipments.

“It’s a critical situation for us,” said Rajeev Ranjan, chairman and managing director of Tamil Nadu Generation and Distribution Corp., a government-controlled utility that supplies power in the southern state. “We are working with railways closely and these infrastructure bottlenecks need to be improved.”

India is planning to invest 14 trillion rupees ($283 billion) by 2020 to add railway capacity and modernize its network as economic growth and rising incomes spur travel and cargo demand. The nation also intends to build a dedicated 3,300 kilometers freight rail network that will connect eastern and western regions by 2017.

100 Gigawatts

The government also wants to add 100 gigawatts of power generating capacity by March 2017 to ease blackouts. The nation has 186.7 gigawatts, while power producers have mothballed plans to add 42 gigawatts.

The country will need 696 million tons of coal in the year ending March against a projected domestic supply of 559 million tons, according to estimates by the Planning Commission, an agency that designs five-year economic and social programs in India. Supplies from Australia, Indonesia and South Africa may be needed to meet as much as 10 percent of demand.

NMDC Ltd., India’s largest iron-ore producer, also plans to acquire two coking coal mines in Mozambique and Russia to feed planned steel plants in India, Chairman Narendra Kumar Nanda said on Jan. 5.

Still, ports are also complaining about a shortage of rail capacity, which is hindering their ability to handle imports, Shipping Minister G K Vasan said Jan. 19. He has written to the rail ministry about the issue, he said.

“Power plants, steel plants, cement plants, ports, all have connectivity problems,” said Parvesh Minocha, managing director, transport division at Feedback Infrastructure Services Pvt., which advises on construction and infrastructure projects. “Railways have been a disappointing story throughout.”

--With assistance from Ganesh Nagarajan in Chennai. Editors: Vipin V. Nair, Neil Denslow

-0- Feb/01/2012 18:30 GMT

To contact the reporters on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net; Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net

To contact the editors responsible for this story: Neil Denslow at ndenslow@bloomberg.net; Amit Prakash at aprakash1@bloomberg.net


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