We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Wednesday, 20 November 19
FOREIGN DIRECT INVESTMENTS IN COMMERCIAL COAL MINING IN INDIA? - DIPESH DIPU
 In August 2019, Government of India announced its approval for Foreign Direct Investment (FDI) for coal mining, processing and sale. Not that FDI in coal mining sector was new, but novelty in that was that government now permitted foreign ownership of coal mines for commercial sale of coal produced from such mines. He justifications provided by government sources included need for competition in a sector that has been traditionally dominated by government-owned companies Coal India Limited and Singareni Collieries Company Limited; need for enhanced production as here has been shortfall in meeting demand; and, need for newer technologies that may bring in sustainability to coal mining. These indeed are commendable objectives and opening up the sector for foreign participation may certainly be considered a step in the right direction. However, public policy needs to be grounded in realism, and the reality of attractiveness of commercial coal mining in India does not bode well for foreign participation.
The response of government-owned companies for coal blocks on offer for allotment for commercial coal mining was announced in early August 2019 provides the evidence. Nine coal blocks were put on offer for sale of coal in markets and the eligibility for these were restricted to government-owned companies including the state government-owned ones. There were, however, only three coal blocks[1] that received applications by NMDC Limited, Jharkhand State Mineral Development Corporation and Madhya Pradesh State Mining Corporation. This lukewarm response may indicate towards the market sentiments for commercial coal mining in India. It must also be considered here that the coal blocks for allotment for government-owned companies do not have the two-stage auction based bidding for winning the blocks and, thus, the pay-out required to win these coal blocks may be lower in comparison to coal blocks put out for auctions. So, even with lower additional pay-out to government in the form of premium the coal blocks have not found many takers. There may be several underlying economic reasons, which are amplified for foreign participants, and thus, require consideration to evaluate if this approval for FDI in commercial coal mining would have any impact and if it would meet its stated objectives.
The first and the foremost is the economic feasibility of these mines. The foreign, and indeed any private company, would have to participate in auction process for winning a coal block, and commit to a competitive premium to access the resources. This has been an impediment for private sector participation in India, given the evidence of coal blocks awarded for captive consumption in power and non-regulated sectors that include cement, steel and other approved end users. There seems to be some sanity dawning on participants on these auction with every successive rounds of auction, seen from the lower winning premiums, and hence, it may be expected that the trend may continue. Nonetheless, the premium will certainly erode the margins for commercial miners, the extent of this erosion would be a function of degree of competition for the coal blocks. The margins are also likely to be uncertain in view of the price volatility of coal, which in Indian market is pegged with CIL price and a certain premium that reflects typically the discount that IL prices tend to have over energy-equivalent international prices. This uncertainty of prices is likely to be confounded by the uncertainty in demand-supply gap that these commercial miners are required to fulfil. There has been a shortfall in supply in the recent past, evident from the rise in coal imports in the last two years even with the stated objective of the government to reduce coal imports. This may present itself as an opportunity. However, the question is whether this shortfall is likely to sustain, and thus, create a marketplace for commercial miners. With a slump in thermal power generation and nearly absent pipeline of new coal based projects, this assumption may be quite a big one to make and decide in favour of making foreign direct investment in Indian coal mining.
Other important risks pertain to project execution. There have been several impediments in coal mining project implementations, such as procurement of licenses and permits, acquisition of land and rehabilitation and resettlement of project affected people. These, apart from the procedural challenges, involve risk of reputation. Business practices on all these accounts in mining sector have often been marred with controversies and have led to perceptions of externalities in these processes having significant influence on the outcomes. Foreign participants in Indian mining have been wary of these, and hence, have had little success to show even though they have had offices and a few exploration and contract mining projects in India. Apart from reputation, the risks in procurement of licenses and land acquisition create the risks of project delays, which may then translate into cost escalations, thereby impacting project economics. Coal mining projects may have such challenges in attracting foreign direct investment.
There are challenges of talent shortage and financing as well. Innovative technologies that the foreign miners are likely to bring in India will require high quality geo-statisticians, geologists, mine planners and mining engineers. India does produce graduates in these areas of study but quantities do no necessarily reflect quality, which are further compounded by the brain drain of talent into other industries, primarily, information technology. Mining industry in general, and coal mining in particular, has not been able to retain relent in the last decade or so, with advent of opportunities for the smart geoscientists and engineers in alternate industries. Foreign mining companies may find this crippling.
There are challenges in financing too. Coal mining projects may have been good candidates for resource-based financing, but that has not happened on account of several factors, not the least of those being dominance of government-owned companies priding themselves on debt-free balance sheets, and the quality of geological information that may be inferior to global standards. The market for debt for coal mining then often reduces itself to equipment financing with the equipment being securitised to the lenders. Globally preferred model of equipment leasing is still in its relatively early stages of comprehension and acceptance in Indian mining. With limited options of raising finances, the higher degree of equity investments may also be a deterrent for foreign investors as the may have comparable projects competing for scarce capital.
Coal mining industry has been on a downward spiral globally. Foreign large miners have divested or are divesting their stakes in coal projects. Global bankers have committed themselves to not financing coal and coal based power projects. Insurance companies are shying away from coal projects too. The ecosystem for coal mining project execution is dying. Epitaphs are being written on coal and its demise is predicted by governments, investors and policy analysts wold over. But for the coal addiction of Asia, China and India in particular, the demise may have been sooner. Under such gloomy outlook for the industry, with coal mining companies filing for bankruptcies frequently, it would be tough to get these foreign companies to look at Indian destinations favourably. An industry staring at terminal decline may not witness new investors, and old ones that may have been facing severe challenges in their home countries to look out for opportunities in India.
Optimism at this point of time of foreign miners participating in Indian coal mining sector, that presents a challenging business environment, may be misplaced. Only when the government calls for applications for coal blocks for sale of coal with permitted participation for foreign direct investment that the final picture shall emerge.
By Dipesh Dipu
Energy, Natural Resources and Infrastructure Expert
This article originaly published on economictimes and Linkedin
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Wednesday, 31 January 24
CHINA'S INNER MONGOLIA COAL OUTPUT HIT 1.21B TONS IN 2023 - XINHUA
North China’s Inner Mongolia autonomous region churned out 1.21 billion tons of coal in 2023 as it strives to guarantee the country’s e ...
Wednesday, 31 January 24
GAS EXPORTS COST U.S. CONSUMERS MORE THAN $100 BILLION OVER 16-MONTH PERIOD - IEEFA
Limited Demand Growth Could Dampen the Dry Bulk Market in the Coming Months BIMCOStarting in late 2021—before its invasion of Ukraine—R ...
Tuesday, 30 January 24
LIMITED DEMAND GROWTH COULD DAMPEN THE DRY BULK MARKET IN THE COMING MONTHS - BIMCO
Demand
In our base scenario, we expect cargo demand to grow by 0-1% in 2024 and 0.5-1.5% in 2025. This is a 0.5 percentage point reduction for ...
Friday, 26 January 24
RED SEA DIVERSIONS ADD NEARLY A MILLION DOLLARS PER VOYAGE TO SHIPPING COSTS WHILE DOUBLING TRANSIT TIME - LSEG
The incremental costs of diverting a tanker from Asia to NW Europe via the Cape of Good Hope is accounting for an extra $932,905 USD per voyage whi ...
Friday, 26 January 24
HARD COAL GUARDIAN ANGEL OF THE ENERGY SUPPLY - GERMANY COAL IMPORTERS ASSOCIATION
- No security of supply without hard coal
- The Substitute Power Plant Provision Act (EKBG) must be extended
- Higher grid fees due to the ...
|
|
|
Showing 46 to 50 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Jorong Barutama Greston.PT - Indonesia
- Indonesian Coal Mining Association
- Ind-Barath Power Infra Limited - India
- The State Trading Corporation of India Ltd
- Marubeni Corporation - India
- Rio Tinto Coal - Australia
- The University of Queensland
- Antam Resourcindo - Indonesia
- Bukit Makmur.PT - Indonesia
- Thiess Contractors Indonesia
- Sakthi Sugars Limited - India
- Mercuria Energy - Indonesia
- Singapore Mercantile Exchange
- Mjunction Services Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Manunggal Multi Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Rashtriya Ispat Nigam Limited - India
- Latin American Coal - Colombia
- Bayan Resources Tbk. - Indonesia
- CIMB Investment Bank - Malaysia
- Riau Bara Harum - Indonesia
- Metalloyd Limited - United Kingdom
- Kumho Petrochemical, South Korea
- Krishnapatnam Port Company Ltd. - India
- VISA Power Limited - India
- Australian Commodity Traders Exchange
- Timah Investasi Mineral - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Borneo Indobara - Indonesia
- MS Steel International - UAE
- Merrill Lynch Commodities Europe
- Ambuja Cements Ltd - India
- Coal and Oil Company - UAE
- Sindya Power Generating Company Private Ltd
- Directorate General of MIneral and Coal - Indonesia
- Indogreen Group - Indonesia
- Central Electricity Authority - India
- Planning Commission, India
- Alfred C Toepfer International GmbH - Germany
- Sinarmas Energy and Mining - Indonesia
- Sojitz Corporation - Japan
- International Coal Ventures Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Deloitte Consulting - India
- Maharashtra Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Africa Commodities Group - South Africa
- Posco Energy - South Korea
- Heidelberg Cement - Germany
- Global Business Power Corporation, Philippines
- Sical Logistics Limited - India
- South Luzon Thermal Energy Corporation
- Petron Corporation, Philippines
- Eastern Coal Council - USA
- Kartika Selabumi Mining - Indonesia
- Orica Mining Services - Indonesia
- Pendopo Energi Batubara - Indonesia
- Samtan Co., Ltd - South Korea
- Bhushan Steel Limited - India
- Kepco SPC Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mercator Lines Limited - India
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- Jaiprakash Power Ventures ltd
- The Treasury - Australian Government
- Kohat Cement Company Ltd. - Pakistan
- Coastal Gujarat Power Limited - India
- Barasentosa Lestari - Indonesia
- India Bulls Power Limited - India
- Georgia Ports Authority, United States
- Vijayanagar Sugar Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Attock Cement Pakistan Limited
- SMC Global Power, Philippines
- Coalindo Energy - Indonesia
- Ministry of Finance - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Carbofer General Trading SA - India
- Energy Link Ltd, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Price Waterhouse Coopers - Russia
- Sree Jayajothi Cements Limited - India
- Jindal Steel & Power Ltd - India
- Standard Chartered Bank - UAE
- Bukit Baiduri Energy - Indonesia
- Dalmia Cement Bharat India
- Bahari Cakrawala Sebuku - Indonesia
- CNBM International Corporation - China
- Mintek Dendrill Indonesia
- Wood Mackenzie - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Orica Australia Pty. Ltd.
- Altura Mining Limited, Indonesia
- Power Finance Corporation Ltd., India
- GMR Energy Limited - India
- Aditya Birla Group - India
- Indika Energy - Indonesia
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Billiton Holdings Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- PNOC Exploration Corporation - Philippines
- Indian Energy Exchange, India
- Vedanta Resources Plc - India
- Semirara Mining and Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Cigading International Bulk Terminal - Indonesia
- Videocon Industries ltd - India
- Ceylon Electricity Board - Sri Lanka
- Bangladesh Power Developement Board
- Minerals Council of Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement PLC, Thailand
- Medco Energi Mining Internasional
- Iligan Light & Power Inc, Philippines
- Oldendorff Carriers - Singapore
- Gujarat Electricity Regulatory Commission - India
- European Bulk Services B.V. - Netherlands
- Salva Resources Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Thai Mozambique Logistica
- TNB Fuel Sdn Bhd - Malaysia
- Star Paper Mills Limited - India
- Goldman Sachs - Singapore
- Maheswari Brothers Coal Limited - India
- Karaikal Port Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- New Zealand Coal & Carbon
- Commonwealth Bank - Australia
- Karbindo Abesyapradhi - Indoneisa
- London Commodity Brokers - England
- ASAPP Information Group - India
- PowerSource Philippines DevCo
- OPG Power Generation Pvt Ltd - India
- GVK Power & Infra Limited - India
- Xindia Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Straits Asia Resources Limited - Singapore
- Kobexindo Tractors - Indoneisa
- Directorate Of Revenue Intelligence - India
- TeaM Sual Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Lanco Infratech Ltd - India
- Bharathi Cement Corporation - India
- Leighton Contractors Pty Ltd - Australia
- SN Aboitiz Power Inc, Philippines
- Wilmar Investment Holdings
- Trasteel International SA, Italy
- Kideco Jaya Agung - Indonesia
- Cement Manufacturers Association - India
- Meralco Power Generation, Philippines
- Uttam Galva Steels Limited - India
- White Energy Company Limited
- Therma Luzon, Inc, Philippines
- Independent Power Producers Association of India
- McConnell Dowell - Australia
- Chamber of Mines of South Africa
- Parry Sugars Refinery, India
- IEA Clean Coal Centre - UK
- Makarim & Taira - Indonesia
- Simpson Spence & Young - Indonesia
- Meenaskhi Energy Private Limited - India
- Madhucon Powers Ltd - India
- ICICI Bank Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Globalindo Alam Lestari - Indonesia
- Edison Trading Spa - Italy
- Agrawal Coal Company - India
- PTC India Limited - India
- Electricity Authority, New Zealand
- Renaissance Capital - South Africa
- Indian Oil Corporation Limited
- GN Power Mariveles Coal Plant, Philippines
- Port Waratah Coal Services - Australia
- Kapuas Tunggal Persada - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Kaltim Prima Coal - Indonesia
- Energy Development Corp, Philippines
- Parliament of New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Savvy Resources Ltd - HongKong
- Ministry of Mines - Canada
- Holcim Trading Pte Ltd - Singapore
- Central Java Power - Indonesia
- Baramulti Group, Indonesia
- Ministry of Transport, Egypt
- Tamil Nadu electricity Board
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- Gujarat Sidhee Cement - India
- SMG Consultants - Indonesia
- Romanian Commodities Exchange
- Global Green Power PLC Corporation, Philippines
- Siam City Cement - Thailand
- AsiaOL BioFuels Corp., Philippines
- Malabar Cements Ltd - India
- Anglo American - United Kingdom
- Economic Council, Georgia
- San Jose City I Power Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Eastern Energy - Thailand
- Australian Coal Association
- Essar Steel Hazira Ltd - India
- Interocean Group of Companies - India
- Tata Chemicals Ltd - India
- Banpu Public Company Limited - Thailand
- Aboitiz Power Corporation - Philippines
- Vizag Seaport Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Binh Thuan Hamico - Vietnam
- Larsen & Toubro Limited - India
- Gujarat Mineral Development Corp Ltd - India
|
| |
| |
|
