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Why Coal India is not investing in Railways?
AK Ramdas 03 February 2015

The Railways is in dire need of funding, while Coal India is unable to supply adequate coal as there are not enough rakes. Why not allow Coal India to invest in Railway to ensure that it gets all rakes required to transport coal to its customers and power producers 

 

For the first six months of this fiscal, Coal India Ltd (CIL)'s production, according to the media, has shown a 6% growth to reach 389 million tonnes (mt). This is likely to be around 490 mt by end of March, compared to 462 mt achieved in 2013-14.  That is the good news! But the bad news is because of the non-availability of rakes, most of this increased coal output will remain, unmoved, at the pit heads!
 
Press reports indicate that, as against the daily load average of 207 rakes, Railways have been able to make available only 197 rakes, in the first fortnight of January, leaving a shortfall of 10 rakes. The current stock pile at the pit heads is said to be 42 million tonnes and, if the poor and erratic supply of rakes should continue, this may eventually exceed 50 mt at various points, by end of March.  It appears that rakes have been diverted to carry imported coal cargo from ports to various destinations of its buyers.
 
It may be recalled that Suresh Prabhu, Railway Minister, while addressing the Airtel and the Economic Times Business Summit, stated that the finances of Railways were in "deep trouble".  He wanted huge investments in Railways to make the "engine of growth". 
 
In the ensuing Railway Budget, the Railway Minister can consider the following suggestions for incorporation in the Budget:
 
a) Inviting the main consumers of Coal to invest in Rakes (for example, if NTPC as a large buyer of coal can finance the purchase of rakes that would exclusively be used for THEIR coal movement, in addition to what Railways normally supply)
 
b) direct consumers can also finance the cost of rakes and make them available to Railways, on an agreed "rental" basis for coal movement
 
c) direct consumers can help Railways in completely financing the 'dedicated corridors' for coal movement 
 
d) Railways will additionally allocate a 'Coal Express' for exclusive coal movement, which will be  assigned for exclusive use of rail tracks at night, without disturbing other movements
 
e) since domestic coal shortage is likely to continue for a few years, and imports are imperative, Railways can offer coal importers to 'own' rakes in the above manner so as to increase the movement capacity of Railways for evacuation.
 
Railway minister, Suresh Prabhu can make suitable provisions in the ensuing Budget.
 
This is so that large cargo movements are possible, which are so essential to make sure
that 'make in India' is a success.
 
He also made a pointed reference to sourcing of finance from Pension Funds, which countries like Australia and Canada have done.  Their Pension Funds, runs into trillions of dollars and this has been utilised to help develop their economies. He felt, therefore, there ought to be little or no hesitation for India to consider this route as well.
 
Talking of accessing finance from Pension Fund is one thing but the actual availability of this fund for investment could be a wholly different and difficult issue, as far as India is concerned.
 
According to the press reports, there are about 8.3 crore inactive and 3.49 crore active subscribers and the total value of the Corpus has increased from Rs162,000 crore (in March 2012) to Rs208,000 crore (in March 2014) and the present value of contribution has also increased from Rs149,000 crore to Rs1,71,000 crore in the same period. The net liability as at March 2014 is said to be Rs7,833 crore.
 
It appears a review of the investment norms has been on the card for years but the Labour Ministry and the Trade Unions are said to be not in favour of a change and, have, in fact, sought more benefit under the Employee Pension Scheme.
 
So, if Railways need to access the funds under the EPS, they should be able to attract them by offering a good return on investment. Would the Railway Minister make some provision to this effect in the ensuing Railway budget?
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US)
 
Comments
Vinod Sao
1 decade ago
CIL needs a base to blame for, if the problem solved then who do they blame?

Pl recall, CIL went to Mozambique and took two coal blocks to eyewash their overseas coal acquisition drive, for your kind information these coal blocks were rescind earlier by ASX company after initial exploration which CIL has begged on G2G basis from Govt of Moz.
Reply
rajivahuja
1 decade ago
I whole heartedly agree with your above mentioned proposals.
Reply
K. M. Rao
1 decade ago
Let the Indian Govt permit Railways to pay tax free interest at 7% to 8% and collect money from the public through bonds exclusively for buying rakes, it will be flooded with funds from the public. This is the only way even to fund infrastructure projects not by this failed PPP model.
Reply
vishal
1 decade ago
It is a good thing the production of coal by CIL is plus. This is a good sign, so that higher productivity can be expected in the coming years. As for rakes the trump card is with Railways and not CIL. The private players have their own reason not to hire rakes and move coal, it is not their problem. Similarly, CIL is not short of funds like railways why should they bother about movement of coal?
Reply
Narendra Doshi
1 decade ago
well said Ramdasji. Implement Shri Prabhuji soon.
Reply
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