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