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