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