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.
|
|
Monday, 24 June 24
PHILIPPINES COAL SUPPLY ENOUGH UNTIL 2030 - PHILSTAR GLOBAL
The country’s existing coal-fired power plants are sufficient to ensure enough base load capacity in the next six years, Energy Secretary Rap ...
Friday, 14 June 24
NEXTDECADE, SAUDI ARAMCO SIGN 20-YEAR LNG SUPPLY DEAL - REUTERS
U.S. liquefied natural gas (LNG) provider NextDecade has signed a non-binding agreement with Saudi Aramco 2222.SE to supply 1.2 million tonnes per ...
Friday, 14 June 24
NEWBUILDING PRICES CLIMB 3% TO HIGHEST LEVEL IN 16 YEARS - NIELS RASMUSSEN
“Since the start of the year, newbuilding prices have risen 3% to their highest level since 2008. Compared to their most recent low in late 2 ...
Friday, 14 June 24
INDIA TARGETS HIGHER DOMESTIC COAL PRODUCTION, REDUCED IMPORTS: GOVT - REUTERS
India wants to reduce coal imports and increase domestic production, federal coal minister G. Kishan Reddy said on Thursday.
The cou ...
Thursday, 13 June 24
US LNG TO ASIA FOR POWER GENERATION EXPECTED TO CUT EMISSIONS VERSUS COAL - RYSTAD ENERGY
The value-chain emissions of liquified natural gas (LNG) are lower on average than for coal-fired power generation, even when the fuel is shipp ...
|
|
|
Showing 16 to 20 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Siam City Cement - Thailand
- Latin American Coal - Colombia
- Coalindo Energy - Indonesia
- IEA Clean Coal Centre - UK
- Maheswari Brothers Coal Limited - India
- Anglo American - United Kingdom
- Wilmar Investment Holdings
- San Jose City I Power Corp, Philippines
- Salva Resources Pvt Ltd - India
- SMC Global Power, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Larsen & Toubro Limited - India
- European Bulk Services B.V. - Netherlands
- The State Trading Corporation of India Ltd
- Gujarat Sidhee Cement - India
- Africa Commodities Group - South Africa
- PetroVietnam Power Coal Import and Supply Company
- India Bulls Power Limited - India
- Indika Energy - Indonesia
- VISA Power Limited - India
- Coastal Gujarat Power Limited - India
- Kobexindo Tractors - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Gujarat Electricity Regulatory Commission - India
- White Energy Company Limited
- Thiess Contractors Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Eastern Coal Council - USA
- Indo Tambangraya Megah - Indonesia
- Coal and Oil Company - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Bharathi Cement Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Electricity Authority, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Metalloyd Limited - United Kingdom
- Bukit Baiduri Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Baramulti Group, Indonesia
- Aditya Birla Group - India
- Grasim Industreis Ltd - India
- Merrill Lynch Commodities Europe
- Chamber of Mines of South Africa
- Kalimantan Lumbung Energi - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Leighton Contractors Pty Ltd - Australia
- Dalmia Cement Bharat India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Malabar Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Thai Mozambique Logistica
- Borneo Indobara - Indonesia
- SN Aboitiz Power Inc, Philippines
- Vedanta Resources Plc - India
- Bangladesh Power Developement Board
- Trasteel International SA, Italy
- Interocean Group of Companies - India
- Australian Commodity Traders Exchange
- Rio Tinto Coal - Australia
- Kepco SPC Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Planning Commission, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kapuas Tunggal Persada - Indonesia
- CNBM International Corporation - China
- Directorate Of Revenue Intelligence - India
- Bukit Makmur.PT - Indonesia
- Eastern Energy - Thailand
- Meenaskhi Energy Private Limited - India
- Edison Trading Spa - Italy
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- GMR Energy Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ASAPP Information Group - India
- Pendopo Energi Batubara - Indonesia
- Sojitz Corporation - Japan
- Singapore Mercantile Exchange
- Mercuria Energy - Indonesia
- Ministry of Finance - Indonesia
- Marubeni Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Transport, Egypt
- Goldman Sachs - Singapore
- Bulk Trading Sa - Switzerland
- Timah Investasi Mineral - Indoneisa
- Bhatia International Limited - India
- Attock Cement Pakistan Limited
- Sindya Power Generating Company Private Ltd
- Posco Energy - South Korea
- Australian Coal Association
- LBH Netherlands Bv - Netherlands
- Cement Manufacturers Association - India
- Formosa Plastics Group - Taiwan
- Iligan Light & Power Inc, Philippines
- Parry Sugars Refinery, India
- Kumho Petrochemical, South Korea
- Globalindo Alam Lestari - Indonesia
- PowerSource Philippines DevCo
- Samtan Co., Ltd - South Korea
- Rashtriya Ispat Nigam Limited - India
- Price Waterhouse Coopers - Russia
- Riau Bara Harum - Indonesia
- Madhucon Powers Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Bhushan Steel Limited - India
- Georgia Ports Authority, United States
- Intertek Mineral Services - Indonesia
- Sarangani Energy Corporation, Philippines
- Energy Link Ltd, New Zealand
- Videocon Industries ltd - India
- Ind-Barath Power Infra Limited - India
- Uttam Galva Steels Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- The Treasury - Australian Government
- Kaltim Prima Coal - Indonesia
- Lanco Infratech Ltd - India
- Chettinad Cement Corporation Ltd - India
- IHS Mccloskey Coal Group - USA
- New Zealand Coal & Carbon
- Binh Thuan Hamico - Vietnam
- Parliament of New Zealand
- OPG Power Generation Pvt Ltd - India
- Heidelberg Cement - Germany
- Indian Energy Exchange, India
- Carbofer General Trading SA - India
- Meralco Power Generation, Philippines
- Toyota Tsusho Corporation, Japan
- Essar Steel Hazira Ltd - India
- Makarim & Taira - Indonesia
- Kideco Jaya Agung - Indonesia
- MS Steel International - UAE
- Altura Mining Limited, Indonesia
- GVK Power & Infra Limited - India
- Wood Mackenzie - Singapore
- Indogreen Group - Indonesia
- Deloitte Consulting - India
- Romanian Commodities Exchange
- London Commodity Brokers - England
- Minerals Council of Australia
- Independent Power Producers Association of India
- Kohat Cement Company Ltd. - Pakistan
- Oldendorff Carriers - Singapore
- Vizag Seaport Private Limited - India
- ICICI Bank Limited - India
- Central Java Power - Indonesia
- TeaM Sual Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Commonwealth Bank - Australia
- Medco Energi Mining Internasional
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sakthi Sugars Limited - India
- Tamil Nadu electricity Board
- Star Paper Mills Limited - India
- Sical Logistics Limited - India
- Ministry of Mines - Canada
- Bhoruka Overseas - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Renaissance Capital - South Africa
- Directorate General of MIneral and Coal - Indonesia
- GAC Shipping (India) Pvt Ltd
- Tata Chemicals Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Petron Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Sree Jayajothi Cements Limited - India
- Agrawal Coal Company - India
- Electricity Generating Authority of Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Economic Council, Georgia
- Simpson Spence & Young - Indonesia
- Orica Mining Services - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Global Business Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- The University of Queensland
- Holcim Trading Pte Ltd - Singapore
- Mintek Dendrill Indonesia
- Straits Asia Resources Limited - Singapore
- Ceylon Electricity Board - Sri Lanka
- Port Waratah Coal Services - Australia
- Bayan Resources Tbk. - Indonesia
- Aboitiz Power Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Therma Luzon, Inc, Philippines
- Ambuja Cements Ltd - India
- Barasentosa Lestari - Indonesia
- Central Electricity Authority - India
- Antam Resourcindo - Indonesia
- International Coal Ventures Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Karaikal Port Pvt Ltd - India
- Mjunction Services Limited - India
- Mercator Lines Limited - India
- Global Coal Blending Company Limited - Australia
- Semirara Mining and Power Corporation, Philippines
- Indonesian Coal Mining Association
- PTC India Limited - India
- Orica Australia Pty. Ltd.
- Kartika Selabumi Mining - Indonesia
- Xindia Steels Limited - India
- South Luzon Thermal Energy Corporation
- Indian Oil Corporation Limited
- Semirara Mining Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- McConnell Dowell - Australia
- CIMB Investment Bank - Malaysia
- Standard Chartered Bank - UAE
- SMG Consultants - Indonesia
|
| |
| |
|
