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MELBOURNE (Reuters) - Aurizon Holdings Ltd is talking to Adani Enterprises about building a rail line for the Indian company's proposed $4 billion coal project in Australia, in a plan that could cut costs for the long delayed mine.
Aurizon and Adani have submitted rival applications to the Australian government's Northern Australia Infrastructure Fund for a cheap loan to help fund a rail line into the untapped Galilee Basin, where Adani's Carmichael project is.
Aurizon, which owns Australia's biggest coal rail network, says its proposal would only require a new 180-km (112-mile) railway to connect with its existing Newlands line, a plan that would cost A$1 billion ($750 million) less than Adani's proposal to build a whole new 380-km (236-mile) line.
Aurizon Chief Executive Andrew Harding said his company is in commercial discussions with Adani.
"They now know we're very serious and that we've demonstrated our willingness to go into bat at a federal level as well," he told reporters after speaking at the Melbourne Mining Club.
Adani has received a one-and-a-half page letter from Aurizon outlining its plan, which Adani has yet to respond to, Adani's Australian spokesman Ron Watson said.
But he said Adani held concerns over Aurizon's use of cheaper narrow-gauge rail lines, when Adani requires standard gauge, which can carry greater loads.
"To make the Galilee Basin viable, it needs a standard gauge line," he said, adding: "There were a few things in the proposal we would like to have a discussion about."
Harding said it would be possible to solve the gauge issue by having a dual-gauge line where needed, which would be smarter than having a whole new line running parallel to Aurizon's existing track.
"The Aurizon and proposed Adani corridors are so close that drivers could wave to each other as trains crossed," Harding told the Melbourne Mining Club.
Harding said Aurizon filed its non-binding proposal to the government's infrastructure fund because it would be "strange" for taxpayers to fund Adani's A$1 billion loan request when Aurizon could build a line to the Galilee Basin for much less.
Adani plans to make a final investment decision in May or June on the project, which is now targeting annual output of 25 million tonnes in the first phase, down from an original plan of 40 million tonnes, eliminating the need to expand its Abbot Point coal export terminal.
The reduced scale has boosted Adani's confidence that it will be able to raise funding for the controversial project, which is still strenuously opposed by environmental groups and some land owners.
($1 = 1.3364 Australian dollars)
Reporting by Sonali Paul and James Regan; Editing by Richard Pullin