Mahanadi to move coal via road; rise in fuel prices likely

First, Union Coal Minister Piyush Goyal curbed e-auction sales of coal, triggering protests from transporters. Now, to pacify the protestors, Mahanadi Coalfields Ltd (MCL), a subsidiary of Coal India, is moving a part of its supplies under the fuel supply agreements, via road. This may lead to a rise in coal prices, say sources.

“All consumers of Mahanadi Coalfields who have a fuel-supply agreement (FSA) with the company will have to transport 30 per cent of the FSA quantity by road if the destination point is within 50 km from the mines,” the Sambalpur, Odisha-based company said in a release.

Curbs on e-auction Earlier, the Government’s decision to curb e-auction sale of the fuel had prompted transporters to threaten to stall mining operations in Odisha, which produces a quarter of the country’s total coal output. The truckers fear loss of business if the e-auction quantity is reduced. Coal sold through the e-auction route is moved via road, while those with FSA get it by rail, on captive lines or through the Railways. The truckers want either the open market sales restored or a share of the rail traffic.

MCL’s move to transport FSA coal via road is contrary to the prescriptions of the Union Environment Ministry.

Throughout the last decade, the Environment Ministry has been insisting on rail movement of coal as a pre-condition to grant green nod to mines so as to curb air pollution in the mining districts.

But MCL sources say the initiative, which has the backing of the Coal Ministry, will protect annually 12-18 mt of road cargo that was lost due to curbs on e-auction.

“This scheme saw the light of the day due to active support from Coal India and the Ministry of Coal,” the release said. The arrangement, however, will trigger a sharp rise in the landed cost of coal being supplied under the FSAs, say sources. The e-auction coal was largely sold to numerous ferroalloy makers in the vicinity, each consuming limited quantities, making it suitable for road movement.

Prices may rise Large companies like Bhushan Power and Steel, also participated in the auction as a stop-gap arrangement till their captive mines were ready. They were buying coal at ₹3,000 a tonne from e-auction and paid ₹600-900 a tonne as road freight.

But FSA consumers such as Vedanta, Hindalco Industries are drawing huge volumes at an average price of ₹800-850 a tonne (ex-mine) with the fuel being moved by rail at ₹150 a tonne. Under the new arrangement, they have to pay more for transportation, which will increase the landed cost of the fuel, sources added.