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