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