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Tuesday, 06 September 11
INDONESIAS PROPOSED COAL EXPORT BAN MAY HAVE IMPACT ON THE INDIAN POWER SECTOR - DIPESH DIPU
.jpg) COALspot.com - This is a special interview about Indonesian proposed coal export ban by 2014, with Mr. Dipesh Dipu, Director of Deloitte Touche Tohmatsu, India.
The Indonesian government is currently in the process of drafting a new regulation that could ban the export of low-grade coal by January 12, 2014. This is likely to apply to coal below 5700 kcal/kg on air dried basis in value.
As of now Indonesia is producing around 150 million tons of coal with calorific value below 5700 GAD (according to chairman of Indonesian coal mining association). However by 2014, there are possibilities the total production of below 5700 GAD coal may reach more than 200 million per annum.
Will Indonesian coal export ban impact on the Indian fuel requirements?
The earlier grade of coal that was being considered for proposed ban has GCV of 5100 kcal/kg of less (adb), which can be comparable to 3800-4200 kcal/kg (arb) domestic coal available in India. This grade of coal has found favor in India primarily due to likely price advantage but economics of power generation based on such grade of imported coal may be a suspect. This considering that such grades of coal from Indonesia typically have high moisture content, which makes transportation cost per unit of energy generated higher. The quantum of the low grade of coal (<5100 kcal/kg adb) procured from Indonesia is likely to remain relatively low.
However, if the new definition of low grade coal is applied (<5700 kcal/kg adb), it may be reasonable to believe that such a ban may have impact on the Indian power sector as volumes in this grade of coal are expected to rise in the proportion of coal exports to India. Several of the acquisitions made by Indian power generation companies in Indonesia have been in coal blocks that will produce coal of this grade, and a blanket ban on the exports can jeopardize power plant development in India.
On the other hand, the domestic Indonesian market may not be prepared to consume all the coal mined of this grade in view of the power generation capacity addition plans in Indonesia. In such a case, the coal mine development is likely to be deferred. The Indonesian law makers may need to reconsider domestic market demand, investment climate in coal sector and impact of the legislation on the export revenues.
What is the alternative source for Indian power industry if the proposed coal export ban come into effect by 2014?
Indian power generation companies have been forced to look out for coal assets abroad due to the investment and regulatory environment within the country. India boasts of more than 110 billion tonnes of coal reserves, which largely fall within a 300 meters of depth. If the regulatory and investment environment is amended to allow greater participation of private sector Indian dependence on imports will be reduced.
However, for imports, India will continue to look at Indonesia, South Africa, Australia and newer destinations like Mozambique and Columbia. But these sources also have constraints, domestic demands in South Africa is likely to restrict quantum jump in exports out of South Africa. Indonesia has also proposed domestic market obligations. Mozambique may have infrastructure constraints for large volumes of coal being transported from Tete province to ports of Maputo, Ncala or Beira. Australian coal is of high quality but may have higher costs of mining and transport.
What would be the additional cost if Indian consumers switch their sourcing origin from Indonesia?
Indonesia has competitive advantage due to its geographical closeness. However, on a per tonne basis, assuming comparable quality, costs of transport may make marginal difference when compared with South Africa and Mozambique.
When compared to Australian coal, due to the high quality, cost of energy may well be comparable even though shipping costs are higher. Between Indonesian coal (5500 kcal/kg adb priced at USD 90 per tonne) and Australian coal (6500 kcal/kg adb priced at USD 120 per tonne), indicative variable cost difference of power generation may be about Indian Rupees 0.20 to 0.30 per kWh (electricity unit) in favor of Indonesian coal.
Will it affect Indian economy growth or this coal export ban is ignorable as India can easily identify alternative sources of fuel?
The magnitude of growth in power generation in India will necessarily mean that coal will remain the mainstay. Natural gas has had issues of availability. Nuclear plant development is facing socio-political challenge in view of the risks of technology failure. Development of hydel power has also faced issues of land acquisition, rehabilitation & resettlement apart from the technical issues of hydro-geological features. Renewable sources such as solar and wind generation are still projected to constitute a small portion of India power generation mix. Identifying an alternative source that can match coal in its accessibility, availability and affordability in the context of scale of capacity addition required in India is a challenge.
What is the Indian government's role on this issue, whether government has to come out with the solution such as easing Indian mining and environment law, open up mining for foreigners, G2G arrangement, etc…?
There is a need to look at domestic sources with pro-active and constructive approach and make all necessary legal and statutory amendments that make the resources available and mineable. Easing the regulations may not be one of such measures but making those regulations work in sync with each other in a time bound and predictable manner must certainly be.
There is certainly a case for opening the domestic coal sector for private participation, including independent miners, and for foreign participation so that newer technology and enhanced scale of operations are implemented in India. The regulation also needs to permit risk capital to come in for prospecting and exploration.
For imports the G2G relations can be leveraged to secure coal assets. India has good relationship with Indonesia and has also signed a tax treaty with Mozambique in 2010 which will facilitate investments. Government may also engage with these countries to ease exports to India and extend fiscal support to coal mining companies investing in mining and associated infrastructure development.
About Dipesh Dipu
Dipesh Dipu works as Director with Deloitte Touche Tohmatsu India Pvt. Ltd in the Energy and Resources consulting practice of the firm and anchors the Firm’s initiative in the mining and metals sectors.
He is a mining engineering graduate from Indian School of Mines and is a Chartered Financial Analyst (CFA). He has also done executive program in business management from Indian Institute of Management Calcutta. Dipesh has recently been awarded the Abheraj Baldota Gold Medal for the Young Mining Engineer of the Year 2007 by the Mining Engineers’ Association of India in recognition of his contributions in the improvement of mining industry in India.
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- GMR Energy Limited - India
- Wilmar Investment Holdings
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- South Luzon Thermal Energy Corporation
- Bhoruka Overseas - Indonesia
- Bayan Resources Tbk. - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Ceylon Electricity Board - Sri Lanka
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Mercator Lines Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Madhucon Powers Ltd - India
- Petron Corporation, Philippines
- Central Java Power - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Kobexindo Tractors - Indoneisa
- Georgia Ports Authority, United States
- Wood Mackenzie - Singapore
- Romanian Commodities Exchange
- PTC India Limited - India
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- Sarangani Energy Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- The State Trading Corporation of India Ltd
- Therma Luzon, Inc, Philippines
- Carbofer General Trading SA - India
- Gujarat Mineral Development Corp Ltd - India
- MS Steel International - UAE
- Indian Oil Corporation Limited
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- Karbindo Abesyapradhi - Indoneisa
- Bharathi Cement Corporation - India
- Banpu Public Company Limited - Thailand
- Alfred C Toepfer International GmbH - Germany
- London Commodity Brokers - England
- Aboitiz Power Corporation - Philippines
- Africa Commodities Group - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Vedanta Resources Plc - India
- Rashtriya Ispat Nigam Limited - India
- Sree Jayajothi Cements Limited - India
- Uttam Galva Steels Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Independent Power Producers Association of India
- International Coal Ventures Pvt Ltd - India
- Indonesian Coal Mining Association
- Interocean Group of Companies - India
- Savvy Resources Ltd - HongKong
- Eastern Energy - Thailand
- Iligan Light & Power Inc, Philippines
- Semirara Mining Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
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- Miang Besar Coal Terminal - Indonesia
- Karaikal Port Pvt Ltd - India
- PowerSource Philippines DevCo
- Siam City Cement PLC, Thailand
- Power Finance Corporation Ltd., India
- Siam City Cement - Thailand
- Chamber of Mines of South Africa
- Commonwealth Bank - Australia
- Ind-Barath Power Infra Limited - India
- Larsen & Toubro Limited - India
- Trasteel International SA, Italy
- Indika Energy - Indonesia
- Sojitz Corporation - Japan
- Bukit Baiduri Energy - Indonesia
- Formosa Plastics Group - Taiwan
- IEA Clean Coal Centre - UK
- Sindya Power Generating Company Private Ltd
- Global Green Power PLC Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Electricity Authority, New Zealand
- India Bulls Power Limited - India
- Barasentosa Lestari - Indonesia
- Parry Sugars Refinery, India
- Planning Commission, India
- Maheswari Brothers Coal Limited - India
- Posco Energy - South Korea
- Borneo Indobara - Indonesia
- Toyota Tsusho Corporation, Japan
- Tamil Nadu electricity Board
- IHS Mccloskey Coal Group - USA
- Kideco Jaya Agung - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Parliament of New Zealand
- TeaM Sual Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- VISA Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Transport, Egypt
- Eastern Coal Council - USA
- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- The Treasury - Australian Government
- Renaissance Capital - South Africa
- SN Aboitiz Power Inc, Philippines
- Antam Resourcindo - Indonesia
- Meenaskhi Energy Private Limited - India
- Pendopo Energi Batubara - Indonesia
- Global Coal Blending Company Limited - Australia
- Ambuja Cements Ltd - India
- CIMB Investment Bank - Malaysia
- Coal and Oil Company - UAE
- Indian Energy Exchange, India
- Metalloyd Limited - United Kingdom
- Holcim Trading Pte Ltd - Singapore
- Coalindo Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Marubeni Corporation - India
- McConnell Dowell - Australia
- SMC Global Power, Philippines
- Ministry of Finance - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bukit Makmur.PT - Indonesia
- Energy Link Ltd, New Zealand
- OPG Power Generation Pvt Ltd - India
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Electricity Generating Authority of Thailand
- Gujarat Electricity Regulatory Commission - India
- Economic Council, Georgia
- Singapore Mercantile Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thiess Contractors Indonesia
- Central Electricity Authority - India
- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Sinarmas Energy and Mining - Indonesia
- Jindal Steel & Power Ltd - India
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- Bank of Tokyo Mitsubishi UFJ Ltd
- The University of Queensland
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- Leighton Contractors Pty Ltd - Australia
- Vizag Seaport Private Limited - India
- Salva Resources Pvt Ltd - India
- ASAPP Information Group - India
- Deloitte Consulting - India
- Cigading International Bulk Terminal - Indonesia
- Jaiprakash Power Ventures ltd
- LBH Netherlands Bv - Netherlands
- Grasim Industreis Ltd - India
- Latin American Coal - Colombia
- Merrill Lynch Commodities Europe
- Makarim & Taira - Indonesia
- Simpson Spence & Young - Indonesia
- Aditya Birla Group - India
- GVK Power & Infra Limited - India
- Mintek Dendrill Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Price Waterhouse Coopers - Russia
- Billiton Holdings Pty Ltd - Australia
- Australian Coal Association
- Bukit Asam (Persero) Tbk - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Coastal Gujarat Power Limited - India
- Energy Development Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- Standard Chartered Bank - UAE
- Mercuria Energy - Indonesia
- Altura Mining Limited, Indonesia
- Indo Tambangraya Megah - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Goldman Sachs - Singapore
- Indogreen Group - Indonesia
- Agrawal Coal Company - India
- Binh Thuan Hamico - Vietnam
- Meralco Power Generation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Straits Asia Resources Limited - Singapore
- Sakthi Sugars Limited - India
- Essar Steel Hazira Ltd - India
- San Jose City I Power Corp, Philippines
- Attock Cement Pakistan Limited
- Minerals Council of Australia
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- New Zealand Coal & Carbon
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- Bhushan Steel Limited - India
- White Energy Company Limited
- SMG Consultants - Indonesia
- Lanco Infratech Ltd - India
- Xindia Steels Limited - India
- Cement Manufacturers Association - India
- Sical Logistics Limited - India
- GAC Shipping (India) Pvt Ltd
- Thai Mozambique Logistica
- Kepco SPC Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Intertek Mineral Services - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ICICI Bank Limited - India
- Australian Commodity Traders Exchange
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- Samtan Co., Ltd - South Korea
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- Directorate Of Revenue Intelligence - India
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- Tata Chemicals Ltd - India
- Heidelberg Cement - Germany
- Ministry of Mines - Canada
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