Material Insights · Understanding the Material World

Coal transport and Thermal coal

Thermal coal is heavy and cheap per tonne, so moving it can cost nearly as much as the coal itself: Coal India said in 2020 that rail freight was about 40 to 45% of the landed cost at the plant. That makes rail capacity, freight tariffs and loading infrastructure as important to coal supply as mine output.

Coal transport (energy) and Thermal coal (energy): 5 relationships.

How they are linked

1. Coal is the railway's main cargo

Physical flow · Strong · Thermal coal → Coal transport

India's coalfields lie in the east while many power plants sit far to the west and south, so most coal for power has to travel long distances by rail.

  • 60% share of coal for grid power moved by rail, 2016-17
  • just over 47% coal's share of Indian Railways freight revenue, 2021-22

Coal earned the railways about ₹65,856 crore of their ₹1.39 lakh crore freight revenue in 2021-22, and Brookings found it has an even larger share of their profits, which ties railway finances to the coal fleet. Plants at the pithead avoid most of this haul by using conveyors or dedicated merry-go-round rail.

Sources: Brookings India (Kamboj and Tongia); ThePrint

2. Freight in the landed cost

Cost and price · Strong · Rail tariffs → delivered coal cost

A power station pays for the coal plus the cost of hauling it, and for low-value coal over long distances the freight can approach the price of the coal itself.

  • 40 to 45% rail freight share of landed cost at the plant, 2020 (Coal India)
  • over 85% railways' share of the cost of moving coal to thermal plants, 2018
  • about 31% estimated over-pricing of coal freight to cover passenger losses, 2018

Because coal freight cross-subsidises passenger fares, distant plants pay more for Indian coal than its pithead price suggests, and coastal plants in western and southern India can find imported coal competitive. Distance-based concessions, such as the 20% rebate for hauls beyond 1,400 km in place in 2020, change that balance directly.

Sources: Brookings India (Kamboj and Tongia); Business Standard

3. Rakes and first-mile loading

Shared risk · High in India · Transport capacity → coal availability at plants

Coal piled at the pithead does not reach a plant without rakes and loading points, so rail bottlenecks can cause shortages at plants while mines hold large stocks.

  • 72 projects, 843 MTY Coal India first-mile connectivity programme
  • 222.5 MTY first-mile capacity completed in 17 projects
  • 23% share of Coal India rake loading done through silos, 2024-25

Silos and conveyors load trains faster and cut road haulage inside the coalfields, and Coal India expects silo loading to reach at least 33% of rake loading in 2025-26. It bills an evacuation charge of ₹60 a tonne on all dispatches to fund this.

Sources: Coal India Limited (via India Infoline)

4. Seaborne leg

Physical flow · Medium · Thermal coal → Coal transport

Coal that crosses borders almost all goes by bulk carrier, so imported coal adds a sea freight leg on top of rail at both ends.

  • over 90% seaborne share of world coal trade, 2024
  • 1,111 Mt expected thermal coal trade in 2025, down 6%
  • about 235 Mt India's expected coal imports in 2025

Trade covers about 18% of world coal demand, so most coal never goes to sea. India's imports feed mainly coastal plants and blending, where sea freight replaces long rail hauls from eastern coalfields.

Sources: IEA

5. Price link: freight cost

Cost and price · Strong · Both ways

Freight is a large part of delivered coal cost, and rail haulage rates often carry fuel surcharges that rise with energy prices.

  • 0.21 monthly change correlation, US rail freight index and seaborne coal
  • 0.66 12-month change correlation
  • 1.57 fitted elasticity

The yearly link is clear because coal and freight respond to the same energy price cycle. Indian rail tariffs are set administratively, so the link there works through tariff revisions rather than monthly moves.

Sources: Material Insights (World Bank, FRED, IMF data)

For investors

Key learnings

  1. For inland Indian plants freight can approach half of delivered fuel cost, so tariff changes and distance concessions shift generation costs as much as coal price changes.
  2. Railway finances lean on coal, which earned just over 47% of freight revenue in 2021-22, so a slowdown in coal burn is a revenue risk for the railways.
  3. First-mile projects and silo loading are the levers that cut Coal India's logistics costs and plant shortages, and their completion rate is worth watching.

What to track

  • Coal rake loading per day: Falling loading with high pithead stocks signals a transport bottleneck (Daily · Indian Railways, Coal India)
  • Railway coal freight tariff and concessions: Changes alter landed cost and the domestic versus imported choice (As announced · Ministry of Railways)
  • Capesize and Panamax dry bulk rates: Rising rates lift the landed cost of imported thermal coal (Daily · Baltic Exchange)

For policymakers

Key learnings

  1. Coal freight that cross-subsidises passengers raises power costs far from the mines, so tariff policy is also electricity price policy.
  2. Shortages at plants often reflect transport limits rather than mine output, so rail and loading capacity belong in coal security planning.
  3. Moving coal by wire rather than by rail, through pithead plants and transmission, is an alternative where corridors are congested.

What to track

  • Coal stocks at non-pithead plants: Low stocks at plants far from mines point to rail limits (Daily · Central Electricity Authority coal stock report)
  • First-mile connectivity project completion: Shows whether mechanised loading is replacing road haulage (Annual · Coal India annual report)

India

Coal is Indian Railways' biggest earner and most coal for power travels by rail, so freight tariffs, rake supply and loading infrastructure decide how much domestic coal reaches plants in the west and south.

Sources

  1. Indian Railways and coal, Brookings India (Kamboj and Tongia) (2018)
  2. Coal is Railways' cash cow: why India's climate goals pose risk for transporter, ThePrint (2023)
  3. Coal India seeks 15% concession from railways for coal transportation, Business Standard (2020)
  4. Coal India Ltd: Management Discussion and Analysis, Annual Report 2024-25, Coal India Limited (via India Infoline) (2025)
  5. Coal 2025: Trade, IEA (2025)
  6. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)