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Homeindustry news'New coal transport mechanism may raise power cost up to 10%'

‘New coal transport mechanism may raise power cost up to 10%’

The overall electricity cost is likely to rise by up to 10% when a fifth of a power plant’s coal requirement is transported through the ‘rail-ship-rail’ system, a senior government official told ET.

The power ministry had on Monday asked Gujarat, Rajasthan, Maharashtra, Punjab as well as NTPC to transport 10-15% of their coal requirement through a combination of land and sea route, also called rail-ship-rail mode.

The new coal transport mechanism was worked out because of logistical constraints of direct rail movement and an anticipated increase in coal requirement in the coming peak demand season of April-May. The power cost will still be cheaper than that produced using imported coal.

“Let’s say today power is being sold at ₹4 per unit then it will be ₹4.4 per unit (after rail-ship-rail). But if we generate power through imported coal, then it will be ₹5 per unit,” the official said. “So, the impact on power generation from imported coal will be much higher than the additional cost because of this longer route of transportation,” he said.

The new mode of transport will take coal from Coal India‘s mines to Paradip Port, from where the fuel will move to the west coast for various power plants, travelling a longer distance than the traditional direct rail route.

“Due to the recent surge in demand and consumption of electricity, the share of coal-based generation has increased. Although the supply of coal from all sources has increased, it is not commensurate with the requirements of thermal power plants,” the power ministry had said on Monday.Last year, a coal supply crisis emerged in April because of a sudden rise in power demand, stretching the Railways and coal production. The coal ministry also plans to have 118 million metric tonnes of domestic coal by the end of the ongoing financial year to avoid a fuel crisis during the peak power demand season in April-May. Other measures like an increased gas supply to power plants, blending of imported coal, and staggered power plant maintenance have also been planned by the power, coal, and renewable energy ministries to meet the upcoming peak demand.

The likely supply of domestic coal during the first half of FY24 would be around 392 million metric tonnes, leaving around 24 million metric tonnes shortfall during the same period, the power ministry said on Monday.

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