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