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