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