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, 13 November 19
SHIPPING MARKET INSIGHT - INTERMODAL
The improvements seen in the dry bulk market during the unexpectedly strong Q3 brought enthusiasm and optimism for a last quarter rally. Indeed as ...
Tuesday, 12 November 19
COAL IMPORTS AT MAJOR PORTS SLIP 18 PC TO 51 MT IN APRIL-OCTOBER - ECONOMIC TIMES
The Indian Ports Association (IPA), which maintains cargo data handled by these 12 ports, in its recent report, said "percentage variation fro ...
Monday, 11 November 19
EMINENT MARITIME ORGANIZATIONS AND INDIVIDUALS WERE HONORED
SHIPTEK 2019 Anchors in Greece for its 12th edition.
Eminent Maritime Organizations and Individuals were honored
Greec ...
Wednesday, 06 November 19
SHIPPING MARKET INSIGHT - INTERMODAL
With less than two months before the end of the year, the shipping and refining industries have already taken measures and invested to accommodate ...
Monday, 04 November 19
COAL INDIA'S OCTOBER PRODUCTION MAY FALL 20% - PTI
Coal India’s production in October is likely to be 19-20 per cent lower at about 40 million tonne, as compared to 49.77 million tonne produce ...
|
|
|
Showing 1291 to 1295 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Jaiprakash Power Ventures ltd
- Gujarat Mineral Development Corp Ltd - India
- Karaikal Port Pvt Ltd - India
- Agrawal Coal Company - India
- Metalloyd Limited - United Kingdom
- Deloitte Consulting - India
- Economic Council, Georgia
- Straits Asia Resources Limited - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Australian Coal Association
- Cigading International Bulk Terminal - Indonesia
- Orica Australia Pty. Ltd.
- Maheswari Brothers Coal Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement - Thailand
- Oldendorff Carriers - Singapore
- Globalindo Alam Lestari - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Wood Mackenzie - Singapore
- Australian Commodity Traders Exchange
- Grasim Industreis Ltd - India
- Mercator Lines Limited - India
- Wilmar Investment Holdings
- Indonesian Coal Mining Association
- TNB Fuel Sdn Bhd - Malaysia
- Georgia Ports Authority, United States
- Ministry of Mines - Canada
- Coal and Oil Company - UAE
- GAC Shipping (India) Pvt Ltd
- Independent Power Producers Association of India
- Kartika Selabumi Mining - Indonesia
- Salva Resources Pvt Ltd - India
- Thiess Contractors Indonesia
- VISA Power Limited - India
- Price Waterhouse Coopers - Russia
- Attock Cement Pakistan Limited
- Indo Tambangraya Megah - Indonesia
- Banpu Public Company Limited - Thailand
- Alfred C Toepfer International GmbH - Germany
- Formosa Plastics Group - Taiwan
- Central Java Power - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kideco Jaya Agung - Indonesia
- Goldman Sachs - Singapore
- Uttam Galva Steels Limited - India
- Vizag Seaport Private Limited - India
- Global Coal Blending Company Limited - Australia
- Thai Mozambique Logistica
- LBH Netherlands Bv - Netherlands
- ASAPP Information Group - India
- Neyveli Lignite Corporation Ltd, - India
- Lanco Infratech Ltd - India
- Ambuja Cements Ltd - India
- San Jose City I Power Corp, Philippines
- Sakthi Sugars Limited - India
- Bhatia International Limited - India
- Xindia Steels Limited - India
- Energy Development Corp, Philippines
- Coastal Gujarat Power Limited - India
- Tamil Nadu electricity Board
- Eastern Coal Council - USA
- CIMB Investment Bank - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Carbofer General Trading SA - India
- OPG Power Generation Pvt Ltd - India
- Indian Energy Exchange, India
- Coalindo Energy - Indonesia
- Kumho Petrochemical, South Korea
- Siam City Cement PLC, Thailand
- Timah Investasi Mineral - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- The University of Queensland
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
- Maharashtra Electricity Regulatory Commission - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Authority, New Zealand
- Sical Logistics Limited - India
- Chettinad Cement Corporation Ltd - India
- Edison Trading Spa - Italy
- Malabar Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Aditya Birla Group - India
- Energy Link Ltd, New Zealand
- Kepco SPC Power Corporation, Philippines
- Anglo American - United Kingdom
- Eastern Energy - Thailand
- White Energy Company Limited
- Sindya Power Generating Company Private Ltd
- Marubeni Corporation - India
- Mintek Dendrill Indonesia
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- European Bulk Services B.V. - Netherlands
- India Bulls Power Limited - India
- Semirara Mining Corp, Philippines
- CNBM International Corporation - China
- Global Business Power Corporation, Philippines
- Parry Sugars Refinery, India
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Sree Jayajothi Cements Limited - India
- Rio Tinto Coal - Australia
- Bharathi Cement Corporation - India
- Kapuas Tunggal Persada - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- Barasentosa Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Mjunction Services Limited - India
- Semirara Mining and Power Corporation, Philippines
- Videocon Industries ltd - India
- Star Paper Mills Limited - India
- Rashtriya Ispat Nigam Limited - India
- Standard Chartered Bank - UAE
- PNOC Exploration Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Intertek Mineral Services - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Simpson Spence & Young - Indonesia
- Cement Manufacturers Association - India
- PowerSource Philippines DevCo
- Parliament of New Zealand
- Ceylon Electricity Board - Sri Lanka
- Tata Chemicals Ltd - India
- Indogreen Group - Indonesia
- Merrill Lynch Commodities Europe
- McConnell Dowell - Australia
- Jorong Barutama Greston.PT - Indonesia
- The Treasury - Australian Government
- Billiton Holdings Pty Ltd - Australia
- Mercuria Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Bukit Makmur.PT - Indonesia
- Central Electricity Authority - India
- Minerals Council of Australia
- Iligan Light & Power Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Sinarmas Energy and Mining - Indonesia
- Samtan Co., Ltd - South Korea
- TeaM Sual Corporation - Philippines
- Africa Commodities Group - South Africa
- Karbindo Abesyapradhi - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Meenaskhi Energy Private Limited - India
- Chamber of Mines of South Africa
- Savvy Resources Ltd - HongKong
- Medco Energi Mining Internasional
- Borneo Indobara - Indonesia
- SMG Consultants - Indonesia
- Bhoruka Overseas - Indonesia
- MS Steel International - UAE
- Manunggal Multi Energi - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SMC Global Power, Philippines
- Sojitz Corporation - Japan
- Antam Resourcindo - Indonesia
- Ministry of Finance - Indonesia
- Bhushan Steel Limited - India
- Gujarat Sidhee Cement - India
- Romanian Commodities Exchange
- Pendopo Energi Batubara - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Aboitiz Power Corporation - Philippines
- Orica Mining Services - Indonesia
- Jindal Steel & Power Ltd - India
- Riau Bara Harum - Indonesia
- Kobexindo Tractors - Indoneisa
- Trasteel International SA, Italy
- Toyota Tsusho Corporation, Japan
- SN Aboitiz Power Inc, Philippines
- South Luzon Thermal Energy Corporation
- The State Trading Corporation of India Ltd
- Dalmia Cement Bharat India
- Directorate Of Revenue Intelligence - India
- Vedanta Resources Plc - India
- Indika Energy - Indonesia
- Renaissance Capital - South Africa
- Latin American Coal - Colombia
- GMR Energy Limited - India
- Essar Steel Hazira Ltd - India
- Bulk Trading Sa - Switzerland
- IEA Clean Coal Centre - UK
- New Zealand Coal & Carbon
- Madhucon Powers Ltd - India
- Meralco Power Generation, Philippines
- AsiaOL BioFuels Corp., Philippines
- ICICI Bank Limited - India
- Interocean Group of Companies - India
- Therma Luzon, Inc, Philippines
- London Commodity Brokers - England
- Planning Commission, India
- Asmin Koalindo Tuhup - Indonesia
- Sarangani Energy Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Heidelberg Cement - Germany
- Petron Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- PTC India Limited - India
- Electricity Generating Authority of Thailand
- Makarim & Taira - Indonesia
- GVK Power & Infra Limited - India
- Baramulti Group, Indonesia
- Ministry of Transport, Egypt
- Commonwealth Bank - Australia
- Port Waratah Coal Services - Australia
- Posco Energy - South Korea
- Kalimantan Lumbung Energi - Indonesia
- Larsen & Toubro Limited - India
- International Coal Ventures Pvt Ltd - India
- Bangladesh Power Developement Board
- Power Finance Corporation Ltd., India
|
| |
| |
|
