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