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, 14 October 19
WINTER OIL MARKET OUTLOOK - OPEC
Product markets in the last two months have benefitted from seasonal maintenance which have led to a tighter product market environment, providing ...
Sunday, 13 October 19
INDONESIA: PANAMAX VESSELS OPEN SOUTH CHINA WERE REPORTEDLY FIXED AT $14,000 LEVEL, WITH REDELIVERY BACK IN CHINA - BALTIC BRIEFING
Capesize
The Capesize market managed to find a floor and rally a little this week after several weeks of declines. While the West Australia to ...
Friday, 11 October 19
INDIAN MINERS REJECT PLAN TO LINK NATIONAL COAL INDEX TO FOREIGN PRICES - REUTERS
India’s miners are rejecting a government proposal to establish a national coal index that would be linked to international prices, documents ...
Friday, 11 October 19
THE OCTOBER BENCHMARK PRICE OF INDONESIAN THERMAL COAL DECLINES TO LOWEST SINCE OCTOBER 2016
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of Indonesian thermal ...
Friday, 11 October 19
KOREA SOUTH-EAST POWER TO IMPORT LCV COAL IN NOVEMBER
COALspot.com: South Korea’s Korea South-East Power Co., Ltd. (KOEN) has issued an international tender for 75,000 Metric Tons low calorific v ...
|
|
|
Showing 1316 to 1320 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- The University of Queensland
- Meralco Power Generation, Philippines
- Cement Manufacturers Association - India
- Leighton Contractors Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Romanian Commodities Exchange
- White Energy Company Limited
- Sical Logistics Limited - India
- Timah Investasi Mineral - Indoneisa
- Sojitz Corporation - Japan
- Ambuja Cements Ltd - India
- Lanco Infratech Ltd - India
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Maheswari Brothers Coal Limited - India
- OPG Power Generation Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CIMB Investment Bank - Malaysia
- Kaltim Prima Coal - Indonesia
- Anglo American - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Dalmia Cement Bharat India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Heidelberg Cement - Germany
- Goldman Sachs - Singapore
- Bukit Baiduri Energy - Indonesia
- Mercuria Energy - Indonesia
- Trasteel International SA, Italy
- Salva Resources Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Sree Jayajothi Cements Limited - India
- SMG Consultants - Indonesia
- Merrill Lynch Commodities Europe
- Globalindo Alam Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Savvy Resources Ltd - HongKong
- Semirara Mining and Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Thiess Contractors Indonesia
- Economic Council, Georgia
- South Luzon Thermal Energy Corporation
- CNBM International Corporation - China
- ASAPP Information Group - India
- Star Paper Mills Limited - India
- Formosa Plastics Group - Taiwan
- Bulk Trading Sa - Switzerland
- Australian Commodity Traders Exchange
- Karaikal Port Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Coal and Oil Company - UAE
- Indo Tambangraya Megah - Indonesia
- Central Java Power - Indonesia
- Mjunction Services Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Generating Authority of Thailand
- PTC India Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Orica Australia Pty. Ltd.
- Commonwealth Bank - Australia
- Sinarmas Energy and Mining - Indonesia
- Georgia Ports Authority, United States
- Manunggal Multi Energi - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- International Coal Ventures Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Straits Asia Resources Limited - Singapore
- Deloitte Consulting - India
- Tata Chemicals Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Medco Energi Mining Internasional
- Mintek Dendrill Indonesia
- Ministry of Finance - Indonesia
- Iligan Light & Power Inc, Philippines
- Edison Trading Spa - Italy
- Petrochimia International Co. Ltd.- Taiwan
- Barasentosa Lestari - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Grasim Industreis Ltd - India
- Ministry of Transport, Egypt
- Makarim & Taira - Indonesia
- Kobexindo Tractors - Indoneisa
- Indonesian Coal Mining Association
- Gujarat Mineral Development Corp Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Eastern Coal Council - USA
- Parliament of New Zealand
- VISA Power Limited - India
- New Zealand Coal & Carbon
- Bharathi Cement Corporation - India
- Global Business Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Rio Tinto Coal - Australia
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- Metalloyd Limited - United Kingdom
- Africa Commodities Group - South Africa
- AsiaOL BioFuels Corp., Philippines
- Bayan Resources Tbk. - Indonesia
- Toyota Tsusho Corporation, Japan
- SMC Global Power, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Agrawal Coal Company - India
- Marubeni Corporation - India
- PNOC Exploration Corporation - Philippines
- Parry Sugars Refinery, India
- Interocean Group of Companies - India
- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Ministry of Mines - Canada
- Cigading International Bulk Terminal - Indonesia
- Sakthi Sugars Limited - India
- Australian Coal Association
- Bukit Makmur.PT - Indonesia
- IEA Clean Coal Centre - UK
- Port Waratah Coal Services - Australia
- Altura Mining Limited, Indonesia
- Siam City Cement PLC, Thailand
- Minerals Council of Australia
- Xindia Steels Limited - India
- Energy Development Corp, Philippines
- San Jose City I Power Corp, Philippines
- Indogreen Group - Indonesia
- Aboitiz Power Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Bhatia International Limited - India
- Baramulti Group, Indonesia
- The State Trading Corporation of India Ltd
- TeaM Sual Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- GVK Power & Infra Limited - India
- Carbofer General Trading SA - India
- Coastal Gujarat Power Limited - India
- McConnell Dowell - Australia
- Maharashtra Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Power Finance Corporation Ltd., India
- Global Green Power PLC Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Planning Commission, India
- Wilmar Investment Holdings
- Indika Energy - Indonesia
- Electricity Authority, New Zealand
- Posco Energy - South Korea
- Eastern Energy - Thailand
- Wood Mackenzie - Singapore
- Kapuas Tunggal Persada - Indonesia
- Central Electricity Authority - India
- Borneo Indobara - Indonesia
- Bhoruka Overseas - Indonesia
- Oldendorff Carriers - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Uttam Galva Steels Limited - India
- Independent Power Producers Association of India
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- Asmin Koalindo Tuhup - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bhushan Steel Limited - India
- Essar Steel Hazira Ltd - India
- Riau Bara Harum - Indonesia
- Energy Link Ltd, New Zealand
- London Commodity Brokers - England
- Renaissance Capital - South Africa
- Global Coal Blending Company Limited - Australia
- Chamber of Mines of South Africa
- Antam Resourcindo - Indonesia
- Siam City Cement - Thailand
- GAC Shipping (India) Pvt Ltd
- Chettinad Cement Corporation Ltd - India
- Thai Mozambique Logistica
- Singapore Mercantile Exchange
- Mercator Lines Limited - India
- Madhucon Powers Ltd - India
- MS Steel International - UAE
- Bangladesh Power Developement Board
- Gujarat Electricity Regulatory Commission - India
- Vedanta Resources Plc - India
- Sindya Power Generating Company Private Ltd
- Directorate Of Revenue Intelligence - India
- Binh Thuan Hamico - Vietnam
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ind-Barath Power Infra Limited - India
- ICICI Bank Limited - India
- Simpson Spence & Young - Indonesia
- Larsen & Toubro Limited - India
- Standard Chartered Bank - UAE
- Aditya Birla Group - India
- Krishnapatnam Port Company Ltd. - India
- Attock Cement Pakistan Limited
- Kideco Jaya Agung - Indonesia
- Therma Luzon, Inc, Philippines
- Kumho Petrochemical, South Korea
- GN Power Mariveles Coal Plant, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Indian Oil Corporation Limited
- Kepco SPC Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Coalindo Energy - Indonesia
- The Treasury - Australian Government
- Karbindo Abesyapradhi - Indoneisa
- Jaiprakash Power Ventures ltd
- Tamil Nadu electricity Board
- Petron Corporation, Philippines
- Indian Energy Exchange, India
- Billiton Holdings Pty Ltd - Australia
- GMR Energy Limited - India
- Vizag Seaport Private Limited - India
- Meenaskhi Energy Private Limited - India
- Videocon Industries ltd - India
- Rashtriya Ispat Nigam Limited - India
- Ceylon Electricity Board - Sri Lanka
- Semirara Mining Corp, Philippines
|
| |
| |
|
