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, 12 June 24
CHINA ACCOUNTS FOR 16.3% OF AUSTRALIA'S COAL EXPORTS, FOLLOWED BY INDIA 14.4% - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels says Banchero Costa in its latest report.
...
Wednesday, 12 June 24
LNG NEWBUILDING VALUES AT RECORD HIGH: 78 NEWBUILD ORDERS PLACED IN 2024, DOUBLING 2023 - VESON NAUTICAL
The number of LNG newbuilding orders have more than doubled from the same period last year where 34 orders were placed, compared to 78 in the first ...
Monday, 10 June 24
CHINA'S MAY COAL IMPORTS RISE 11% ON LOWER DOMESTIC OUTPUT - REUTERS
China’s imports of coal rose 11% in May from a year earlier, customs data and Reuters records showed on Friday, as lower domestic output this ...
Tuesday, 04 June 24
HOW DO WESTERN SANCTIONS ON RUSSIA IMPACT THE GLOBAL METALS, MINING AND COAL MARKETS - WOOD MACKENZIE
The geopolitical landscape for Russia, as a major supplier of various commodities, has undergone a dramatic transformation since the invasion of Uk ...
Friday, 22 March 24
CASE STUDY: DANGERS OF COAL CARGO - SKULD
Recently, a bulk cargo vessel carrying coal from South Africa to Singapore suffered a fatal accident, resulting in the deaths of three crew members ...
|
|
|
Showing 21 to 25 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Manunggal Multi Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Singapore Mercantile Exchange
- TNB Fuel Sdn Bhd - Malaysia
- PNOC Exploration Corporation - Philippines
- CNBM International Corporation - China
- Borneo Indobara - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Chettinad Cement Corporation Ltd - India
- Jindal Steel & Power Ltd - India
- MS Steel International - UAE
- Jaiprakash Power Ventures ltd
- Indian Energy Exchange, India
- Therma Luzon, Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kaltim Prima Coal - Indonesia
- Ministry of Transport, Egypt
- Holcim Trading Pte Ltd - Singapore
- Orica Mining Services - Indonesia
- Global Business Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- IEA Clean Coal Centre - UK
- Planning Commission, India
- Kepco SPC Power Corporation, Philippines
- Aditya Birla Group - India
- Siam City Cement - Thailand
- Vedanta Resources Plc - India
- Star Paper Mills Limited - India
- Economic Council, Georgia
- Merrill Lynch Commodities Europe
- Meralco Power Generation, Philippines
- The University of Queensland
- Gujarat Mineral Development Corp Ltd - India
- Romanian Commodities Exchange
- Coal and Oil Company - UAE
- Gujarat Sidhee Cement - India
- Kartika Selabumi Mining - Indonesia
- Port Waratah Coal Services - Australia
- SMC Global Power, Philippines
- PowerSource Philippines DevCo
- VISA Power Limited - India
- Central Java Power - Indonesia
- Gujarat Electricity Regulatory Commission - India
- SN Aboitiz Power Inc, Philippines
- Carbofer General Trading SA - India
- Orica Australia Pty. Ltd.
- GN Power Mariveles Coal Plant, Philippines
- CIMB Investment Bank - Malaysia
- Chamber of Mines of South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Grasim Industreis Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The State Trading Corporation of India Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Interocean Group of Companies - India
- Cigading International Bulk Terminal - Indonesia
- Salva Resources Pvt Ltd - India
- Latin American Coal - Colombia
- Australian Coal Association
- Eastern Energy - Thailand
- The Treasury - Australian Government
- European Bulk Services B.V. - Netherlands
- San Jose City I Power Corp, Philippines
- Binh Thuan Hamico - Vietnam
- Bulk Trading Sa - Switzerland
- Goldman Sachs - Singapore
- Bhoruka Overseas - Indonesia
- Uttam Galva Steels Limited - India
- Riau Bara Harum - Indonesia
- Bangladesh Power Developement Board
- Meenaskhi Energy Private Limited - India
- Ambuja Cements Ltd - India
- Power Finance Corporation Ltd., India
- Independent Power Producers Association of India
- Altura Mining Limited, Indonesia
- McConnell Dowell - Australia
- Oldendorff Carriers - Singapore
- Rio Tinto Coal - Australia
- Krishnapatnam Port Company Ltd. - India
- Metalloyd Limited - United Kingdom
- Sree Jayajothi Cements Limited - India
- Coastal Gujarat Power Limited - India
- Barasentosa Lestari - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Wilmar Investment Holdings
- Bhatia International Limited - India
- Xindia Steels Limited - India
- Karbindo Abesyapradhi - Indoneisa
- White Energy Company Limited
- Mercator Lines Limited - India
- GVK Power & Infra Limited - India
- Bhushan Steel Limited - India
- Ministry of Mines - Canada
- Coalindo Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Rashtriya Ispat Nigam Limited - India
- Africa Commodities Group - South Africa
- Cement Manufacturers Association - India
- Thiess Contractors Indonesia
- GMR Energy Limited - India
- Bukit Baiduri Energy - Indonesia
- Minerals Council of Australia
- Australian Commodity Traders Exchange
- Edison Trading Spa - Italy
- South Luzon Thermal Energy Corporation
- Sarangani Energy Corporation, Philippines
- Parry Sugars Refinery, India
- Vijayanagar Sugar Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Medco Energi Mining Internasional
- Lanco Infratech Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Global Coal Blending Company Limited - Australia
- International Coal Ventures Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Wood Mackenzie - Singapore
- Madhucon Powers Ltd - India
- Sindya Power Generating Company Private Ltd
- Bukit Makmur.PT - Indonesia
- ICICI Bank Limited - India
- TeaM Sual Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- Thai Mozambique Logistica
- Maharashtra Electricity Regulatory Commission - India
- London Commodity Brokers - England
- Energy Development Corp, Philippines
- Essar Steel Hazira Ltd - India
- Sical Logistics Limited - India
- Aboitiz Power Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Directorate Of Revenue Intelligence - India
- Asmin Koalindo Tuhup - Indonesia
- Makarim & Taira - Indonesia
- Antam Resourcindo - Indonesia
- Dalmia Cement Bharat India
- Formosa Plastics Group - Taiwan
- Eastern Coal Council - USA
- Larsen & Toubro Limited - India
- Kumho Petrochemical, South Korea
- Alfred C Toepfer International GmbH - Germany
- Karaikal Port Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- AsiaOL BioFuels Corp., Philippines
- Timah Investasi Mineral - Indoneisa
- Mintek Dendrill Indonesia
- Mercuria Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Posco Energy - South Korea
- Indogreen Group - Indonesia
- Indonesian Coal Mining Association
- Indika Energy - Indonesia
- Sakthi Sugars Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Miang Besar Coal Terminal - Indonesia
- Videocon Industries ltd - India
- Trasteel International SA, Italy
- Bayan Resources Tbk. - Indonesia
- Simpson Spence & Young - Indonesia
- Marubeni Corporation - India
- Georgia Ports Authority, United States
- Jorong Barutama Greston.PT - Indonesia
- Energy Link Ltd, New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kideco Jaya Agung - Indonesia
- Tamil Nadu electricity Board
- Pipit Mutiara Jaya. PT, Indonesia
- India Bulls Power Limited - India
- Tata Chemicals Ltd - India
- Electricity Generating Authority of Thailand
- Banpu Public Company Limited - Thailand
- Mjunction Services Limited - India
- Semirara Mining and Power Corporation, Philippines
- Commonwealth Bank - Australia
- LBH Netherlands Bv - Netherlands
- Maheswari Brothers Coal Limited - India
- Iligan Light & Power Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Renaissance Capital - South Africa
- SMG Consultants - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vizag Seaport Private Limited - India
- Ministry of Finance - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Malabar Cements Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Intertek Mineral Services - Indonesia
- OPG Power Generation Pvt Ltd - India
- Sojitz Corporation - Japan
- Attock Cement Pakistan Limited
- ASAPP Information Group - India
- Price Waterhouse Coopers - Russia
- Directorate General of MIneral and Coal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- PTC India Limited - India
- Electricity Authority, New Zealand
- Central Electricity Authority - India
- Baramulti Group, Indonesia
- Global Green Power PLC Corporation, Philippines
- Indian Oil Corporation Limited
- Bharathi Cement Corporation - India
- Petron Corporation, Philippines
- Heidelberg Cement - Germany
- Toyota Tsusho Corporation, Japan
- Straits Asia Resources Limited - Singapore
- Parliament of New Zealand
- Standard Chartered Bank - UAE
- Agrawal Coal Company - India
- Anglo American - United Kingdom
- Ind-Barath Power Infra Limited - India
- GAC Shipping (India) Pvt Ltd
- New Zealand Coal & Carbon
- Siam City Cement PLC, Thailand
|
| |
| |
|
