Coastal coal transportation to double, says CRISIL

Freightage set to jump to 63 mtpa by fiscal 2023, once bottlenecks ease: CRISIL

Coastal shipping is the most preferred, as it is far cheaper than other modes.

Coastal transportation of coal is likely to double to 63 million tonne per annum (mtpa) by fiscal 2023, from 32 mtpa as of fiscal 2017 as structural bottlenecks ease, according to CRISIL Research.

In India, bulk of the coastal movement of coal is carried out along the eastern coast, from Mahanadi Coalfields’ mines via the Paradip and Dhamra ports in Odisha, to power plants in Andhra Pradesh and Tamil Nadu.

Congested berths

However, congested berths, particularly at Paradip, are holding back rise in potential volumes, it said.

“According to estimates, the overall coastal potential from operational plants alone aggregates to 63 mtpa today, including 35.7 mtpa from plants located near ports and 27.3 mtpa from those located 200-400 km inland,” CRISIL Research said. In the longer term, additional coastal coal volume of 25-30 mtpa is expected from transportation to power plants with Mahanadi Coalfields linkage in Maharashtra and Gujarat, on the west coast, it added. Partial import substitution of import-based power plants would add a further 15 mtpa.

Domestic production

“A spurt in domestic production would bring down the share of imports in the power sector’s coal demand,” said Prasad Koparkar, senior director, CRISIL Research.

“While demand will grow at 6% CAGR to 827 mtpa in fiscal 2022 from 621 mtpa in fiscal 2017, the share of imports will reduce from 11% to 7%. The share of coastal coal in demand will increase from 5% to 7%, which would also ease the congestion on railway tracks,” he said.

Transportation cost

Transportation cost accounts for 25-35% of the cost of power produced by a plant located 1,000 kms from the mine where it sources coal from.

Since coastal shipping is far cheaper compared with transportation by rail, power plants are expected to prefer the coastal route once the loading infrastructure at ports and the rail connectivity projects come on stream, CRISIL Research said.