CIL supply linkage rationalisation saves power stations costs

KOLKATA (miningweekly.com) – At least 58 thermal power plants in India have been able to save an estimated $531-million since Coal India Limited (CIL) started rationalising its coal supply linkages, the mining company has claimed.

The rationalisation exercise, which started in 2015, entails replacing coal sourced from distant mines to mines closer to the thermal power plant, aiming to lower transportation costs.

Bringing coal sources closer to thermal power stations also ensures faster turnaround of railway rakes and makes a higher number of rakes available.

Initially, CIL identified 19 thermal power plants for rationalisation of coal supply linkages, but the success of lowering transportation costs led to the company extending the exercise to 58 plants and officials said that more power stations would be brought under the purview of the rationalisation exercise following a closer study of potential logistics cost savings.

Significantly, even as CIL is focusing on lowering logistical costs for thermal power plants, a parliamentary committee in a report submitted this week has flagged the miner’s high operating costs, which add to the final cost of the dry fuel and end-user costs.

The parliamentary committee in its report noted that despite several measures taken by the miner, it had not been able to bring down per unit cost of production from underground mines or opencast mines.

Observing that the high operating costs of CIL were a “serious consideration”, the committee said that, during 2018/19, the lowest operating cost of production from an opencast mine was Rs455/t ($6/t) and the highest cost was pegged at Rs1 889/t ($27/t). In the case of underground mines, CIL’s operating costs ranged from as high as Rs4 879/t ($69/t) to Rs27 015/t ($380/t).

To lower operating costs, CIL is converting unsafe and unviable underground mines into opencast mines, deploying heavy earth-moving equipment in opencast mines and conducting e-reverse auction for procurement of explosives. The parliamentary committee, however, noted that these measures had not been successful in bringing down operating costs.