Curtailing Costs

IR working towards reducing expenditure on energy

In recent years, energy management has been a key focus area of Indian Railways (IR). It has undertaken a number of initiatives to curtail fuel costs. Energy costs (comprising diesel and electricity costs) roughly account for 25 per cent of IR’s ordinary working expenses. During 2016-17, its total energy expenditure stood at Rs 260 billion, of which Rs 110 billion was spent on electric traction and Rs 75 billion on diesel traction. The traction cost has been increasing at 10 per cent on a year-on-year basis.

From 2014-15 to 2016-17, the amount spent on electricity and diesel has declined. In 2014-15, IR’s electricity bill was Rs 108.8 billion, while the amount spent on diesel was Rs 220 billion. These costs, however, reduced in 2015-16 to Rs 102 billion for electric traction and Rs 160 billion for diesel traction, primarily owing to a decline in diesel prices. The trend of declining energy costs continued during 2016-17, when energy efficiency improved by 4-5 per cent with savings standing at Rs 37.66 billion.

Key initiatives

Two major components of IR’s expenditure are the amount spent on manpower (65 per cent of expenditure) and energy (25 per cent of expenditure). From 2009-10 to 2014-15, the rate of growth of cost of traction energy increased by 10 per cent on a year-on-year basis.

To reduce its energy bills, IR has undertaken a number of initiatives. It has switched to procuring a part of its electricity requirements directly from the market through the bidding route (short-term and long-term contracts). IR has also contracted about 500 MW of power from Ratnagiri Gas and Power Private Limited at about Rs 5 per unit for consumption in the states of Maharashtra, Gujarat, Madhya Pradesh and Jharkhand. Further, Railway Energy Management Company Limited (REMCL), a joint venture of IR and RITES Limited, contracted 50 MW through the open tendering system at Rs 3.69 per unit using the Ministry of Power’s (MoP) Case 1 bidding document. With this initiative, IR was successful in reducing its energy cost by Rs 30 billion in 2015-16.

The operationalisation of its deemed licensee status (allowing IR to transmit, distribute and trade power, enabling it to buy power directly from states that have surplus power and are offering lower per unit rates) has given unprecedented opportunity to IR to reduce its high cost of power for traction purposes. After successfully procuring power through open access in Maharashtra, Gujarat, Madhya Pradesh, Jharkhand and Uttar Pradesh, it has been established that there is a potential for substantial savings through this route.

Mission 41k

In January 2017, IR announced Mission 41k to save Rs 410 billion in energy costs during 2015-25. It has also set a target of harnessing 1,000 MW of solar power and 200 MW of wind energy in the next five years. The Ministry of Railways (MoR) plans to undertake the electrification of an additional 24,000 route km in the next five years by taking the present rate of electrification from 2,000 route km to 4,000 route km in the next two years.

The way forward

IR plans to reduce its traction bill substantially by introducing energy-saving technologies and measures in traction and non-traction systems and changing the energy mix by setting up solar and wind power plants. Further, to support its increasing requirements, it is also setting up dedicated transmission lines. IR’s energy plans thus present great opportunities for gencos, renewable energy developers, technology providers, and manufacturers of rolling stock and electrical equipment.

Based on presentations by Sudhir Garg, executive director, electrical energy management, MoR, and J.C.S. Bora, general manager, REMCL      

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