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.
|
|
Sunday, 26 May 19
SUPRAMAX: A LIMITED ACTIVITY WAS REPORTED, WITH THE UPCOMING INDONESIAN HOLIDAYS SLOWING COAL MOVEMENTS - BALTIC BRIEFING
Capesize
The past week marked one of the busier periods for Capesizes this year. With a subdued start due to a public holiday in Singapore on M ...
Wednesday, 22 May 19
SHIPPING MARKET INSIGHT - INTERMODAL
The ship repair sector is showing a constant and gradual increase on the workload throughout the past months, with almost all the shipyards worldwi ...
Saturday, 18 May 19
SUPRAMAX: 56,000DWT OPEN PANJANG FIXING AT $10,500 FOR A TRIP VIA INDONESIA, AND REDELIVERY CHINA - BALTIC EXCHANGE
Capesize
The market continues to ebb and flow with a generally positive up trend. The Capesize 5TC opened with upward momentum from last week&r ...
Friday, 17 May 19
CHINA'S BENCHMARK POWER COAL PRICE REMAINS FLAT - XINHUA
China’s benchmark power coal price remained flat during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of ...
Thursday, 16 May 19
SUPRAMAX: INDO/CHINA COAL RV TRADING AROUND US$ 9,000 BSS S.CHINA DELIVERY - FEARNLEYS
Capesize
This volatile segment is trying to find a clear direction from the present US$ 12,000/day earnings for standard units says Fearnleys W ...
|
|
|
Showing 1396 to 1400 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Bulk Trading Sa - Switzerland
- Uttam Galva Steels Limited - India
- AsiaOL BioFuels Corp., Philippines
- Medco Energi Mining Internasional
- Banpu Public Company Limited - Thailand
- Deloitte Consulting - India
- Bukit Makmur.PT - Indonesia
- PTC India Limited - India
- Aboitiz Power Corporation - Philippines
- Merrill Lynch Commodities Europe
- Pendopo Energi Batubara - Indonesia
- Australian Coal Association
- Sojitz Corporation - Japan
- Mercator Lines Limited - India
- Dalmia Cement Bharat India
- Attock Cement Pakistan Limited
- Sakthi Sugars Limited - India
- New Zealand Coal & Carbon
- Global Green Power PLC Corporation, Philippines
- Planning Commission, India
- Central Java Power - Indonesia
- Oldendorff Carriers - Singapore
- The Treasury - Australian Government
- Leighton Contractors Pty Ltd - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Africa Commodities Group - South Africa
- Borneo Indobara - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Barasentosa Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Vizag Seaport Private Limited - India
- Sree Jayajothi Cements Limited - India
- Samtan Co., Ltd - South Korea
- Savvy Resources Ltd - HongKong
- Georgia Ports Authority, United States
- Videocon Industries ltd - India
- Sinarmas Energy and Mining - Indonesia
- Metalloyd Limited - United Kingdom
- Sarangani Energy Corporation, Philippines
- Tamil Nadu electricity Board
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Thai Mozambique Logistica
- PowerSource Philippines DevCo
- Maheswari Brothers Coal Limited - India
- CIMB Investment Bank - Malaysia
- Economic Council, Georgia
- ASAPP Information Group - India
- Mjunction Services Limited - India
- San Jose City I Power Corp, Philippines
- Coastal Gujarat Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- GVK Power & Infra Limited - India
- McConnell Dowell - Australia
- Asmin Koalindo Tuhup - Indonesia
- Mercuria Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Indika Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Orica Australia Pty. Ltd.
- Kapuas Tunggal Persada - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Singapore Mercantile Exchange
- Bharathi Cement Corporation - India
- Thiess Contractors Indonesia
- India Bulls Power Limited - India
- Anglo American - United Kingdom
- European Bulk Services B.V. - Netherlands
- Indian Energy Exchange, India
- Kartika Selabumi Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Aditya Birla Group - India
- SMG Consultants - Indonesia
- Globalindo Alam Lestari - Indonesia
- VISA Power Limited - India
- Standard Chartered Bank - UAE
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Indian Oil Corporation Limited
- TNB Fuel Sdn Bhd - Malaysia
- Essar Steel Hazira Ltd - India
- Meralco Power Generation, Philippines
- Ministry of Transport, Egypt
- Kumho Petrochemical, South Korea
- Central Electricity Authority - India
- Alfred C Toepfer International GmbH - Germany
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement - Thailand
- Coalindo Energy - Indonesia
- Chamber of Mines of South Africa
- Electricity Authority, New Zealand
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Makarim & Taira - Indonesia
- Timah Investasi Mineral - Indoneisa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Global Business Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Eastern Energy - Thailand
- Semirara Mining and Power Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Gujarat Mineral Development Corp Ltd - India
- Commonwealth Bank - Australia
- Independent Power Producers Association of India
- Energy Link Ltd, New Zealand
- Meenaskhi Energy Private Limited - India
- Star Paper Mills Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Riau Bara Harum - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Rio Tinto Coal - Australia
- Simpson Spence & Young - Indonesia
- OPG Power Generation Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Edison Trading Spa - Italy
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- SN Aboitiz Power Inc, Philippines
- Indogreen Group - Indonesia
- Kideco Jaya Agung - Indonesia
- SMC Global Power, Philippines
- MS Steel International - UAE
- Kobexindo Tractors - Indoneisa
- Bhatia International Limited - India
- Mintek Dendrill Indonesia
- Tata Chemicals Ltd - India
- Karaikal Port Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Directorate Of Revenue Intelligence - India
- Petrochimia International Co. Ltd.- Taiwan
- Global Coal Blending Company Limited - Australia
- Bayan Resources Tbk. - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Latin American Coal - Colombia
- White Energy Company Limited
- Malabar Cements Ltd - India
- Petron Corporation, Philippines
- Altura Mining Limited, Indonesia
- Binh Thuan Hamico - Vietnam
- Agrawal Coal Company - India
- Heidelberg Cement - Germany
- Ministry of Mines - Canada
- Ministry of Finance - Indonesia
- The University of Queensland
- Carbofer General Trading SA - India
- Coal and Oil Company - UAE
- CNBM International Corporation - China
- Trasteel International SA, Italy
- Australian Commodity Traders Exchange
- Lanco Infratech Ltd - India
- Bangladesh Power Developement Board
- Posco Energy - South Korea
- The State Trading Corporation of India Ltd
- TeaM Sual Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Renaissance Capital - South Africa
- IEA Clean Coal Centre - UK
- Minerals Council of Australia
- Cigading International Bulk Terminal - Indonesia
- Orica Mining Services - Indonesia
- Interocean Group of Companies - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Price Waterhouse Coopers - Russia
- Parliament of New Zealand
- Antam Resourcindo - Indonesia
- Ambuja Cements Ltd - India
- Sical Logistics Limited - India
- GMR Energy Limited - India
- Larsen & Toubro Limited - India
- Indonesian Coal Mining Association
- Ind-Barath Power Infra Limited - India
- GAC Shipping (India) Pvt Ltd
- Kohat Cement Company Ltd. - Pakistan
- Bhushan Steel Limited - India
- Chettinad Cement Corporation Ltd - India
- Intertek Mineral Services - Indonesia
- Grasim Industreis Ltd - India
- Madhucon Powers Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Parry Sugars Refinery, India
- Manunggal Multi Energi - Indonesia
- Jindal Steel & Power Ltd - India
- Vedanta Resources Plc - India
- Kepco SPC Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Goldman Sachs - Singapore
- Indo Tambangraya Megah - Indonesia
- LBH Netherlands Bv - Netherlands
- Power Finance Corporation Ltd., India
- Bhoruka Overseas - Indonesia
- Port Waratah Coal Services - Australia
- International Coal Ventures Pvt Ltd - India
- London Commodity Brokers - England
- Wilmar Investment Holdings
- Gujarat Sidhee Cement - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Coal Council - USA
- Semirara Mining Corp, Philippines
- Energy Development Corp, Philippines
- ICICI Bank Limited - India
- Electricity Generating Authority of Thailand
- Cement Manufacturers Association - India
- Marubeni Corporation - India
- Wood Mackenzie - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Toyota Tsusho Corporation, Japan
- Bahari Cakrawala Sebuku - Indonesia
- Baramulti Group, Indonesia
- Xindia Steels Limited - India
- Karbindo Abesyapradhi - Indoneisa
|
| |
| |
|
