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