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