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, 08 April 19
SULPHUR 2020 - COUNTDOWN TO THE SWITCHOVER - LLOYD'S REGISTER
Sulphur 2020 (MARPOL Annex VI Reg. 14.1.3) is still dominating headlines and as we draw closer to the 1 January 2020 deadline it’s clear that ...
Monday, 08 April 19
INDONESIAN COAL PRICE REFERENCE PRICE PLUMMETS TO LOW NOT SEEN SINCE AUGUST 2017
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of Indonesian thermal ...
Sunday, 07 April 19
SHIP PASSAGE PLANS - NO ROOM FOR ERROR! - WATSON FARLEY & WILLIAMS
KNOWLEDGE TO ELEVATE
The English High Court’s judgment in Alize 1954 v Allianz Elementar Versicherungs AG (The CMA CGM Libra) is an impo ...
Sunday, 07 April 19
IMO 2020: READY OR NOT? - WOOD MACKENZIE
New Year’s Day 2020 is firmly marked in the calendar as the refining and shipping industries prepare for change.
The International Marit ...
Saturday, 06 April 19
AUSTRALIA COAL POSTS BIGGEST WEEKLY DROP IN A DECADE AMID WEAK DEMAND - REUTERS
Australian thermal coal prices this week registered their biggest weekly fall since the financial market turmoil of a decade ago as demand plunged ...
|
|
|
Showing 1431 to 1435 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Bayan Resources Tbk. - Indonesia
- Orica Australia Pty. Ltd.
- Bhatia International Limited - India
- Orica Mining Services - Indonesia
- Central Electricity Authority - India
- Directorate Of Revenue Intelligence - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Gujarat Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- ICICI Bank Limited - India
- Bukit Baiduri Energy - Indonesia
- Indonesian Coal Mining Association
- Port Waratah Coal Services - Australia
- Vedanta Resources Plc - India
- Interocean Group of Companies - India
- Wilmar Investment Holdings
- LBH Netherlands Bv - Netherlands
- Leighton Contractors Pty Ltd - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Ambuja Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Australian Coal Association
- Therma Luzon, Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- MS Steel International - UAE
- Agrawal Coal Company - India
- PTC India Limited - India
- Toyota Tsusho Corporation, Japan
- Cigading International Bulk Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Global Business Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Heidelberg Cement - Germany
- Australian Commodity Traders Exchange
- Indogreen Group - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Sojitz Corporation - Japan
- AsiaOL BioFuels Corp., Philippines
- Gujarat Sidhee Cement - India
- London Commodity Brokers - England
- Borneo Indobara - Indonesia
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- Neyveli Lignite Corporation Ltd, - India
- PetroVietnam Power Coal Import and Supply Company
- Medco Energi Mining Internasional
- New Zealand Coal & Carbon
- Savvy Resources Ltd - HongKong
- IHS Mccloskey Coal Group - USA
- Energy Link Ltd, New Zealand
- Goldman Sachs - Singapore
- Sree Jayajothi Cements Limited - India
- Marubeni Corporation - India
- PNOC Exploration Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Economic Council, Georgia
- ASAPP Information Group - India
- Indian Energy Exchange, India
- Timah Investasi Mineral - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Oldendorff Carriers - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Mercuria Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Trasteel International SA, Italy
- Essar Steel Hazira Ltd - India
- Pendopo Energi Batubara - Indonesia
- Coastal Gujarat Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Jindal Steel & Power Ltd - India
- Thiess Contractors Indonesia
- Miang Besar Coal Terminal - Indonesia
- Aditya Birla Group - India
- Malabar Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Kobexindo Tractors - Indoneisa
- Planning Commission, India
- Central Java Power - Indonesia
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- The Treasury - Australian Government
- Global Coal Blending Company Limited - Australia
- Bukit Makmur.PT - Indonesia
- Petron Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Indian Oil Corporation Limited
- Grasim Industreis Ltd - India
- Edison Trading Spa - Italy
- Samtan Co., Ltd - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kideco Jaya Agung - Indonesia
- Deloitte Consulting - India
- Baramulti Group, Indonesia
- McConnell Dowell - Australia
- Bulk Trading Sa - Switzerland
- Bahari Cakrawala Sebuku - Indonesia
- Standard Chartered Bank - UAE
- Tata Chemicals Ltd - India
- The University of Queensland
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- Thai Mozambique Logistica
- The State Trading Corporation of India Ltd
- SMG Consultants - Indonesia
- Renaissance Capital - South Africa
- Energy Development Corp, Philippines
- Bharathi Cement Corporation - India
- Parliament of New Zealand
- Makarim & Taira - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Bhushan Steel Limited - India
- Siam City Cement PLC, Thailand
- Rashtriya Ispat Nigam Limited - India
- White Energy Company Limited
- Kepco SPC Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- GMR Energy Limited - India
- IEA Clean Coal Centre - UK
- Bangladesh Power Developement Board
- India Bulls Power Limited - India
- Madhucon Powers Ltd - India
- Semirara Mining and Power Corporation, Philippines
- SMC Global Power, Philippines
- Sakthi Sugars Limited - India
- Mercator Lines Limited - India
- Iligan Light & Power Inc, Philippines
- Coal and Oil Company - UAE
- VISA Power Limited - India
- Mintek Dendrill Indonesia
- Riau Bara Harum - Indonesia
- CIMB Investment Bank - Malaysia
- Kumho Petrochemical, South Korea
- Merrill Lynch Commodities Europe
- Antam Resourcindo - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Star Paper Mills Limited - India
- South Luzon Thermal Energy Corporation
- Anglo American - United Kingdom
- Banpu Public Company Limited - Thailand
- Independent Power Producers Association of India
- Directorate General of MIneral and Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Price Waterhouse Coopers - Russia
- GAC Shipping (India) Pvt Ltd
- Parry Sugars Refinery, India
- Chettinad Cement Corporation Ltd - India
- Maheswari Brothers Coal Limited - India
- Ministry of Transport, Egypt
- Binh Thuan Hamico - Vietnam
- Kohat Cement Company Ltd. - Pakistan
- Simpson Spence & Young - Indonesia
- Bhoruka Overseas - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Romanian Commodities Exchange
- Xindia Steels Limited - India
- Rio Tinto Coal - Australia
- Jaiprakash Power Ventures ltd
- Altura Mining Limited, Indonesia
- Tamil Nadu electricity Board
- CNBM International Corporation - China
- Aboitiz Power Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- Commonwealth Bank - Australia
- Larsen & Toubro Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Mjunction Services Limited - India
- Attock Cement Pakistan Limited
- Uttam Galva Steels Limited - India
- Georgia Ports Authority, United States
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Eastern Energy - Thailand
- Meenaskhi Energy Private Limited - India
- Africa Commodities Group - South Africa
- Electricity Generating Authority of Thailand
- SN Aboitiz Power Inc, Philippines
- Wood Mackenzie - Singapore
- GVK Power & Infra Limited - India
- Latin American Coal - Colombia
- Ministry of Finance - Indonesia
- Metalloyd Limited - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Meralco Power Generation, Philippines
- Dalmia Cement Bharat India
- Power Finance Corporation Ltd., India
- Cement Manufacturers Association - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- San Jose City I Power Corp, Philippines
- Chamber of Mines of South Africa
- Kaltim Prima Coal - Indonesia
- Eastern Coal Council - USA
- Indo Tambangraya Megah - Indonesia
- Posco Energy - South Korea
- Holcim Trading Pte Ltd - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Minerals Council of Australia
- Lanco Infratech Ltd - India
- Intertek Mineral Services - Indonesia
- Straits Asia Resources Limited - Singapore
- Carbofer General Trading SA - India
- Semirara Mining Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Mines - Canada
- Sindya Power Generating Company Private Ltd
- Videocon Industries ltd - India
- TeaM Sual Corporation - Philippines
- Electricity Authority, New Zealand
- European Bulk Services B.V. - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- PowerSource Philippines DevCo
- Coalindo Energy - Indonesia
- Indika Energy - Indonesia
- Barasentosa Lestari - Indonesia
|
| |
| |
|
