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