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Railways plans to reduce its energy bill by Rs 4800 crore

Railways plans to reduce its energy bill by Rs 4800 crore
Railways plans to reduce its energy bill by Rs 4800 crore

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In a bid to reduce its energy bill, Railways is now planning import crude oil directly and start procuring power from the generators.

According to a PTI report, the diesel procurement policy has been reviewed and it has been decided to import crude oil directly and get it refined at oil marketing companies back home.

With this move, a part of a larger reform, Railways has also floated a tender for selection of a consultant to identify alternate procurement strategies which will enable to transporter to procure diesel at market linked prices.

As of today, Indian Railways consumes around 2.8 billion litres diesel annually at a cost of Rs 18,000 crore, which turns out to be around 18 per cent of its working expenses. The price of fuel is governed by a rate contract which is decided via an open tender by the Railway Board.

In the current scenario, zonal railways place their respective diesel orders with the oil marketing companies per their annual contract and oil depots maintain minimum 7 days of inventory, the cost of which is borne by the Railways.

An official claimed that the new method of procuring fuel will help save at least 10 per cent on the current fuel bill. Accordingly, railways has sought Petroleum Ministry’s permission to import crude oil directly.

“We are discussing the issue of procurement of crude and booking refinery capacity to process our crude as a service as only 40-50 per cent of crude converts to diesel. So an arrangement with the refiner to buy back the remaining products of crude processing needs to be put in place,” he told PTI.

Railways is also planning to save approximately Rs 3,000 crore in sourcing electricity by proposing to procure power through a competitive bidding process, a move that will allow it to get get favourable tariff from generating companies, power exchanges, and bilateral agreements.

Railways, which procures power from distribution companies, spends about Rs 12,300 crore a year to purchase 17.5 billion units of electricity.

Besides, railways have also rolled out plans to set up 1,000 MW solar power plants over the next five years at railway-owned lands and rooftops of railway buildings. The plan will be implemented with support from the Ministry of New & Renewable Energy.


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