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Coal India may invest ₹ 5,000 crto procure railway wagons

Coal India is in talks with the Indian Railways for an investment of ₹5,000 crore to procure wagons that carry coal. This could end up being the single largest investment by a railway customer for procuring wagons.

This is the first time that Coal India, which has cash reserves of ₹59,000 crore as on September 2014, is investing in railway wagons, though earlier it had invested in rail link infrastructure. For fiscal 2015-16, Coal India has a target of investing ₹6,000 crore to ramp up mine infrastructure and railway connectivity.

“The specific terms and conditions of the scheme are being worked out…It entails an investment of ₹5,000 crore,” Ajay Shukla, Member-Traffic, Railway Board, told BusinessLine.

“Coal India had approved a plan to acquire 2,000 railway wagons in December, with a total plan to procure 9,500 wagons. While there is no specific design change that has been sought, the 2,000 wagons will be solely used for Coal India’s transportation needs,” a senior Coal Ministry official said.

The move is good news for wagon players. “Each coal wagon costs about ₹35-40 lakh depending on whether it is a top discharge or a bottom discharge wagon. This is without taxes,” said Naresh Kumar, a former Railway official, with experience in the wagon industry. Kumar now runs a start-up Techlog Support Services.

The Railways has wagon investment schemes that allows customers to invest in rolling stock and get some freight discount, among other benefits, over a long period of time. There have been investments by petroleum product companies, mining firms and cement firms in such schemes, but Coal India’s investment may end up being one of the single largest deals. The Coal Ministry official did not reveal whether there will be any freight discount.

Annually, Coal India transports 250-260 million tonnes of coal through Indian Railways, roughly half of its production. In 2014-15, the Railways carried a total of 545 million tonnes of coal in 2014-15, accounting for almost 50 per cent of the 1,097 million tonnes of its freight carried during the year.

Earnings from coal transportation accounted for about 47 per cent of total freight earnings of railways. With an average wagon life of about 30 years, the Indian Railways has a wagon fleet of 2.45 lakh wagons, of which about 1.4 lakh wagons are open wagons that are usually used to carry coal.

source: http://www.thehindubusinessline.com