Indian Railways to plug into National Power Grid

Will source power directly from the latter to cut costs, improve operations

Shine Jacob & Shreya Jai | New Delhi August 8, 2016 

To get reliable power supply and also cut purchase cost, Indian Railways (IR) is mulling options to buy power directly from the national grid. For this, Railways’ arm Rail Vikas Nigam Ltd (RVNL) will tie up with Power Grid Corporation of India.

IR is the biggest consumer of electricity, consuming about 18 billion units per year. Currently, it sources power at an average cost of Rs 6-7.5 per unit. Buying power from the grid would help the railways save at least Rs 3 per unit. The spot market price has dipped below Rs 3 per unit. Government officials said it would reap dual benefits for the railways — cost and power reliability.

“We are having a discussion in this regard with Power Grid. The proposal is under consideration,” confirmed A K Kapoor, member electrical, Railway Board. He refused to divulge details.

Power Grid and IR are looking at options – either to form a joint venture (JV) or appoint Power Grid as a contractor. The JV would be formed between RVNL and Power Grid, wherein the latter would construct the system and RVNL would purchase power.

RVNL has a power trading licence and the Railways already directly sources power from Ratnagiri Gas & Power Pvt Ltd (RGPPL) in Maharashtra and Adani Power in Gujarat. Indian Railways would pay the transmission cost to Power Grid as it is the central transmission utility of the country as well.

In the second mode, IR would use the services of Power Grid as an engineering, procurement, construction (EPC) contractor to build and facilitate the system for purchasing power directly from the grid. IR would pay the contract fees to Power Grid and manage the system through RVNL.

The plan is to roll out this direct power purchase in urban electrified routes. It would be on two routes – Delhi-Baruch and Mumbai-Howrah.

“Though it’s a bulk consumer, the railways can look at halving the cost of power. More, it would avoid power supply fluctuations which occur due to states succumbing to power cuts and roasting. Unreliable power hurts operations of the national carrier. This would go a long way in improving the efficiency of the railways,” said the official.

Power Grid is also ready to bear the electrification cost in return for sharing the benefits that IR get from lower energy cost, say sources.

IR currently sources power from states and through power plants, paying commercial rates which are usually high.

Power supply from states is dependent on intra-state grid capacity. Power cuts and grid tripping hurt the supply to the Railways as it is not a part of any scheduled power supply.

According to source, if the proposal gets cleared, the JV might also take up railway electrification projects. About 26,269 route kilometres of IR tracks (40 per cent) are now electrified.

When contacted by Business Standard, Power Grid Chairman and Managing Director I S Jha refused to comment, saying the matter was under discussion.