Power tariff is set to move up by approximately 10 paise a unit on an average, due to a “rationalisation” in railway freight with effect from Tuesday.

The announcement, which came as a surprise to Coal India Ltd (CIL) and the power producers, this evening, will lead to an approximately 20 per cent hike in freight rate at Rs 120 a tonne on an average. For a benchmark travel of 700 km of Indian coal, the tariff has moved up by Rs 132 a tonne to Rs 792 a tonne.

A back-of-the-envelope calculation suggests that the railways will mop up nearly Rs 5,400 crore annually from the consumers, including power producers, for carrying approximately 450 million tonnes of coal a year.

According to a circular dated March 5, the railways changed the freight class of coal from 130 to 150 and, reduced the kilometre classes as well. For example, as against a previous freight rate of every 10 km, the new rates are applicable at a gap of 50 km.

“Nothing official with us, but the railways plan to put coal on a particular freight class may increase tariff in excess of 15 per cent. But it all depends if our plants are railway-fed or MGR (merry-go-round)-fed. In any case, the tariff may move up by 10 paise a unit,” a senior NTPC official confirmed to Business Line . Sources in CESC Ltd have also confirmed a similar impact on tariff due to “steep” freight hike.

While senior CIL executives were caught unawares, analysts suggest that Indian coal generally travels 500-700 km. The total cargo movement, inclusive of all commodities, is pegged at approximately 800 million tonnes of which nearly 450 mt are coal.

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