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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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- Sinarmas Energy and Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Tamil Nadu electricity Board
- Minerals Council of Australia
- Edison Trading Spa - Italy
- European Bulk Services B.V. - Netherlands
- Electricity Authority, New Zealand
- Commonwealth Bank - Australia
- Simpson Spence & Young - Indonesia
- Sojitz Corporation - Japan
- Marubeni Corporation - India
- Mjunction Services Limited - India
- AsiaOL BioFuels Corp., Philippines
- Vizag Seaport Private Limited - India
- Videocon Industries ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Coal and Oil Company - UAE
- International Coal Ventures Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Madhucon Powers Ltd - India
- Makarim & Taira - Indonesia
- Eastern Energy - Thailand
- ASAPP Information Group - India
- Riau Bara Harum - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bharathi Cement Corporation - India
- Essar Steel Hazira Ltd - India
- Intertek Mineral Services - Indonesia
- Wilmar Investment Holdings
- Ind-Barath Power Infra Limited - India
- Sical Logistics Limited - India
- Dalmia Cement Bharat India
- Australian Coal Association
- Wood Mackenzie - Singapore
- Meralco Power Generation, Philippines
- Antam Resourcindo - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- CNBM International Corporation - China
- The State Trading Corporation of India Ltd
- Timah Investasi Mineral - Indoneisa
- Cement Manufacturers Association - India
- IEA Clean Coal Centre - UK
- PetroVietnam Power Coal Import and Supply Company
- Kohat Cement Company Ltd. - Pakistan
- Kobexindo Tractors - Indoneisa
- Borneo Indobara - Indonesia
- Samtan Co., Ltd - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Maheswari Brothers Coal Limited - India
- Karaikal Port Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Independent Power Producers Association of India
- Kideco Jaya Agung - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Indonesian Coal Mining Association
- Petron Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- The Treasury - Australian Government
- Karbindo Abesyapradhi - Indoneisa
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- PowerSource Philippines DevCo
- Sarangani Energy Corporation, Philippines
- Lanco Infratech Ltd - India
- Merrill Lynch Commodities Europe
- Metalloyd Limited - United Kingdom
- LBH Netherlands Bv - Netherlands
- Medco Energi Mining Internasional
- Globalindo Alam Lestari - Indonesia
- Planning Commission, India
- Economic Council, Georgia
- Bukit Asam (Persero) Tbk - Indonesia
- Mintek Dendrill Indonesia
- Binh Thuan Hamico - Vietnam
- Aditya Birla Group - India
- PTC India Limited - India
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Bayan Resources Tbk. - Indonesia
- Price Waterhouse Coopers - Russia
- Energy Development Corp, Philippines
- India Bulls Power Limited - India
- Parliament of New Zealand
- Orica Mining Services - Indonesia
- New Zealand Coal & Carbon
- GAC Shipping (India) Pvt Ltd
- Thai Mozambique Logistica
- South Luzon Thermal Energy Corporation
- Xindia Steels Limited - India
- Maharashtra Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- Bhatia International Limited - India
- Parry Sugars Refinery, India
- Global Coal Blending Company Limited - Australia
- Jaiprakash Power Ventures ltd
- Krishnapatnam Port Company Ltd. - India
- Electricity Generating Authority of Thailand
- White Energy Company Limited
- Ceylon Electricity Board - Sri Lanka
- Coalindo Energy - Indonesia
- VISA Power Limited - India
- Anglo American - United Kingdom
- Bhushan Steel Limited - India
- Semirara Mining Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Mercator Lines Limited - India
- Australian Commodity Traders Exchange
- Alfred C Toepfer International GmbH - Germany
- Port Waratah Coal Services - Australia
- Agrawal Coal Company - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMC Global Power, Philippines
- Altura Mining Limited, Indonesia
- Gujarat Sidhee Cement - India
- Asmin Koalindo Tuhup - Indonesia
- Africa Commodities Group - South Africa
- Thiess Contractors Indonesia
- Siam City Cement - Thailand
- Leighton Contractors Pty Ltd - Australia
- Interocean Group of Companies - India
- ICICI Bank Limited - India
- Indika Energy - Indonesia
- Mercuria Energy - Indonesia
- Baramulti Group, Indonesia
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- Straits Asia Resources Limited - Singapore
- Indian Oil Corporation Limited
- Rio Tinto Coal - Australia
- Holcim Trading Pte Ltd - Singapore
- Trasteel International SA, Italy
- Power Finance Corporation Ltd., India
- Kartika Selabumi Mining - Indonesia
- Singapore Mercantile Exchange
- Cigading International Bulk Terminal - Indonesia
- Attock Cement Pakistan Limited
- Rashtriya Ispat Nigam Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Banpu Public Company Limited - Thailand
- The University of Queensland
- Indian Energy Exchange, India
- Larsen & Toubro Limited - India
- Vedanta Resources Plc - India
- Neyveli Lignite Corporation Ltd, - India
- Global Business Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Offshore Bulk Terminal Pte Ltd, Singapore
- PNOC Exploration Corporation - Philippines
- Kumho Petrochemical, South Korea
- Posco Energy - South Korea
- GMR Energy Limited - India
- OPG Power Generation Pvt Ltd - India
- GVK Power & Infra Limited - India
- Chettinad Cement Corporation Ltd - India
- Uttam Galva Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Bangladesh Power Developement Board
- Billiton Holdings Pty Ltd - Australia
- Georgia Ports Authority, United States
- Energy Link Ltd, New Zealand
- Grasim Industreis Ltd - India
- Bukit Baiduri Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Sakthi Sugars Limited - India
- Bhoruka Overseas - Indonesia
- Standard Chartered Bank - UAE
- Directorate Of Revenue Intelligence - India
- IHS Mccloskey Coal Group - USA
- Miang Besar Coal Terminal - Indonesia
- Jindal Steel & Power Ltd - India
- Carbofer General Trading SA - India
- Chamber of Mines of South Africa
- London Commodity Brokers - England
- Indogreen Group - Indonesia
- Bulk Trading Sa - Switzerland
- Iligan Light & Power Inc, Philippines
- Ministry of Finance - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Central Java Power - Indonesia
- Eastern Coal Council - USA
- Siam City Cement PLC, Thailand
- SMG Consultants - Indonesia
- Ministry of Mines - Canada
- Malabar Cements Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Heidelberg Cement - Germany
- Aboitiz Power Corporation - Philippines
- Ministry of Transport, Egypt
- McConnell Dowell - Australia
- CIMB Investment Bank - Malaysia
- Central Electricity Authority - India
- Pendopo Energi Batubara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Tata Chemicals Ltd - India
- Salva Resources Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Goldman Sachs - Singapore
- Romanian Commodities Exchange
- MS Steel International - UAE
- Kapuas Tunggal Persada - Indonesia
- Ambuja Cements Ltd - India
- Oldendorff Carriers - Singapore
- Gujarat Mineral Development Corp Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Deloitte Consulting - India
- Therma Luzon, Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Coastal Gujarat Power Limited - India
- Renaissance Capital - South Africa
- Toyota Tsusho Corporation, Japan
- Formosa Plastics Group - Taiwan
- Gujarat Electricity Regulatory Commission - India
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