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Tuesday, 06 September 11
INDONESIAS PROPOSED COAL EXPORT BAN MAY HAVE IMPACT ON THE INDIAN POWER SECTOR - DIPESH DIPU
.jpg) COALspot.com - This is a special interview about Indonesian proposed coal export ban by 2014, with Mr. Dipesh Dipu, Director of Deloitte Touche Tohmatsu, India.
The Indonesian government is currently in the process of drafting a new regulation that could ban the export of low-grade coal by January 12, 2014. This is likely to apply to coal below 5700 kcal/kg on air dried basis in value.
As of now Indonesia is producing around 150 million tons of coal with calorific value below 5700 GAD (according to chairman of Indonesian coal mining association). However by 2014, there are possibilities the total production of below 5700 GAD coal may reach more than 200 million per annum.
Will Indonesian coal export ban impact on the Indian fuel requirements?
The earlier grade of coal that was being considered for proposed ban has GCV of 5100 kcal/kg of less (adb), which can be comparable to 3800-4200 kcal/kg (arb) domestic coal available in India. This grade of coal has found favor in India primarily due to likely price advantage but economics of power generation based on such grade of imported coal may be a suspect. This considering that such grades of coal from Indonesia typically have high moisture content, which makes transportation cost per unit of energy generated higher. The quantum of the low grade of coal (<5100 kcal/kg adb) procured from Indonesia is likely to remain relatively low.
However, if the new definition of low grade coal is applied (<5700 kcal/kg adb), it may be reasonable to believe that such a ban may have impact on the Indian power sector as volumes in this grade of coal are expected to rise in the proportion of coal exports to India. Several of the acquisitions made by Indian power generation companies in Indonesia have been in coal blocks that will produce coal of this grade, and a blanket ban on the exports can jeopardize power plant development in India.
On the other hand, the domestic Indonesian market may not be prepared to consume all the coal mined of this grade in view of the power generation capacity addition plans in Indonesia. In such a case, the coal mine development is likely to be deferred. The Indonesian law makers may need to reconsider domestic market demand, investment climate in coal sector and impact of the legislation on the export revenues.
What is the alternative source for Indian power industry if the proposed coal export ban come into effect by 2014?
Indian power generation companies have been forced to look out for coal assets abroad due to the investment and regulatory environment within the country. India boasts of more than 110 billion tonnes of coal reserves, which largely fall within a 300 meters of depth. If the regulatory and investment environment is amended to allow greater participation of private sector Indian dependence on imports will be reduced.
However, for imports, India will continue to look at Indonesia, South Africa, Australia and newer destinations like Mozambique and Columbia. But these sources also have constraints, domestic demands in South Africa is likely to restrict quantum jump in exports out of South Africa. Indonesia has also proposed domestic market obligations. Mozambique may have infrastructure constraints for large volumes of coal being transported from Tete province to ports of Maputo, Ncala or Beira. Australian coal is of high quality but may have higher costs of mining and transport.
What would be the additional cost if Indian consumers switch their sourcing origin from Indonesia?
Indonesia has competitive advantage due to its geographical closeness. However, on a per tonne basis, assuming comparable quality, costs of transport may make marginal difference when compared with South Africa and Mozambique.
When compared to Australian coal, due to the high quality, cost of energy may well be comparable even though shipping costs are higher. Between Indonesian coal (5500 kcal/kg adb priced at USD 90 per tonne) and Australian coal (6500 kcal/kg adb priced at USD 120 per tonne), indicative variable cost difference of power generation may be about Indian Rupees 0.20 to 0.30 per kWh (electricity unit) in favor of Indonesian coal.
Will it affect Indian economy growth or this coal export ban is ignorable as India can easily identify alternative sources of fuel?
The magnitude of growth in power generation in India will necessarily mean that coal will remain the mainstay. Natural gas has had issues of availability. Nuclear plant development is facing socio-political challenge in view of the risks of technology failure. Development of hydel power has also faced issues of land acquisition, rehabilitation & resettlement apart from the technical issues of hydro-geological features. Renewable sources such as solar and wind generation are still projected to constitute a small portion of India power generation mix. Identifying an alternative source that can match coal in its accessibility, availability and affordability in the context of scale of capacity addition required in India is a challenge.
What is the Indian government's role on this issue, whether government has to come out with the solution such as easing Indian mining and environment law, open up mining for foreigners, G2G arrangement, etc…?
There is a need to look at domestic sources with pro-active and constructive approach and make all necessary legal and statutory amendments that make the resources available and mineable. Easing the regulations may not be one of such measures but making those regulations work in sync with each other in a time bound and predictable manner must certainly be.
There is certainly a case for opening the domestic coal sector for private participation, including independent miners, and for foreign participation so that newer technology and enhanced scale of operations are implemented in India. The regulation also needs to permit risk capital to come in for prospecting and exploration.
For imports the G2G relations can be leveraged to secure coal assets. India has good relationship with Indonesia and has also signed a tax treaty with Mozambique in 2010 which will facilitate investments. Government may also engage with these countries to ease exports to India and extend fiscal support to coal mining companies investing in mining and associated infrastructure development.
About Dipesh Dipu
Dipesh Dipu works as Director with Deloitte Touche Tohmatsu India Pvt. Ltd in the Energy and Resources consulting practice of the firm and anchors the Firm’s initiative in the mining and metals sectors.
He is a mining engineering graduate from Indian School of Mines and is a Chartered Financial Analyst (CFA). He has also done executive program in business management from Indian Institute of Management Calcutta. Dipesh has recently been awarded the Abheraj Baldota Gold Medal for the Young Mining Engineer of the Year 2007 by the Mining Engineers’ Association of India in recognition of his contributions in the improvement of mining industry in India.
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- Bukit Baiduri Energy - Indonesia
- White Energy Company Limited
- International Coal Ventures Pvt Ltd - India
- The Treasury - Australian Government
- Timah Investasi Mineral - Indoneisa
- South Luzon Thermal Energy Corporation
- New Zealand Coal & Carbon
- Videocon Industries ltd - India
- Maheswari Brothers Coal Limited - India
- Globalindo Alam Lestari - Indonesia
- Vedanta Resources Plc - India
- Kohat Cement Company Ltd. - Pakistan
- Marubeni Corporation - India
- Agrawal Coal Company - India
- Aditya Birla Group - India
- Kumho Petrochemical, South Korea
- Singapore Mercantile Exchange
- AsiaOL BioFuels Corp., Philippines
- Bangladesh Power Developement Board
- Mercuria Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Metalloyd Limited - United Kingdom
- GMR Energy Limited - India
- Toyota Tsusho Corporation, Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Coal Council - USA
- Gujarat Mineral Development Corp Ltd - India
- Coal and Oil Company - UAE
- Mjunction Services Limited - India
- Sical Logistics Limited - India
- Madhucon Powers Ltd - India
- Parry Sugars Refinery, India
- Semirara Mining and Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Attock Cement Pakistan Limited
- Commonwealth Bank - Australia
- Orica Mining Services - Indonesia
- Tata Chemicals Ltd - India
- Renaissance Capital - South Africa
- ICICI Bank Limited - India
- Sakthi Sugars Limited - India
- Standard Chartered Bank - UAE
- Siam City Cement PLC, Thailand
- Energy Link Ltd, New Zealand
- Australian Coal Association
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- European Bulk Services B.V. - Netherlands
- Cigading International Bulk Terminal - Indonesia
- Thai Mozambique Logistica
- Sojitz Corporation - Japan
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- PowerSource Philippines DevCo
- The State Trading Corporation of India Ltd
- London Commodity Brokers - England
- Kaltim Prima Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Independent Power Producers Association of India
- Deloitte Consulting - India
- Global Business Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Samtan Co., Ltd - South Korea
- OPG Power Generation Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Star Paper Mills Limited - India
- Kideco Jaya Agung - Indonesia
- Wood Mackenzie - Singapore
- SMC Global Power, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Chettinad Cement Corporation Ltd - India
- Mintek Dendrill Indonesia
- Bayan Resources Tbk. - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Aboitiz Power Corporation - Philippines
- Economic Council, Georgia
- MS Steel International - UAE
- Sree Jayajothi Cements Limited - India
- Holcim Trading Pte Ltd - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Grasim Industreis Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Electricity Regulatory Commission - India
- Ceylon Electricity Board - Sri Lanka
- ASAPP Information Group - India
- IEA Clean Coal Centre - UK
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- Intertek Mineral Services - Indonesia
- Bharathi Cement Corporation - India
- Kobexindo Tractors - Indoneisa
- Sindya Power Generating Company Private Ltd
- Electricity Generating Authority of Thailand
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- The University of Queensland
- Uttam Galva Steels Limited - India
- Coastal Gujarat Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Indika Energy - Indonesia
- Antam Resourcindo - Indonesia
- Georgia Ports Authority, United States
- Ind-Barath Power Infra Limited - India
- Billiton Holdings Pty Ltd - Australia
- Simpson Spence & Young - Indonesia
- Orica Australia Pty. Ltd.
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- Meralco Power Generation, Philippines
- Meenaskhi Energy Private Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Coal Blending Company Limited - Australia
- Romanian Commodities Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Electricity Authority - India
- Directorate Of Revenue Intelligence - India
- Australian Commodity Traders Exchange
- Merrill Lynch Commodities Europe
- Latin American Coal - Colombia
- Jaiprakash Power Ventures ltd
- Krishnapatnam Port Company Ltd. - India
- Baramulti Group, Indonesia
- Iligan Light & Power Inc, Philippines
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- Indian Energy Exchange, India
- Lanco Infratech Ltd - India
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Tamil Nadu electricity Board
- Mercator Lines Limited - India
- Indogreen Group - Indonesia
- Vizag Seaport Private Limited - India
- Indonesian Coal Mining Association
- Savvy Resources Ltd - HongKong
- Central Java Power - Indonesia
- GAC Shipping (India) Pvt Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Riau Bara Harum - Indonesia
- TeaM Sual Corporation - Philippines
- Posco Energy - South Korea
- Ministry of Finance - Indonesia
- Carbofer General Trading SA - India
- Port Waratah Coal Services - Australia
- India Bulls Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Malabar Cements Ltd - India
- Bhushan Steel Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Straits Asia Resources Limited - Singapore
- Therma Luzon, Inc, Philippines
- Siam City Cement - Thailand
- Bhoruka Overseas - Indonesia
- Chamber of Mines of South Africa
- Minerals Council of Australia
- Ambuja Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Banpu Public Company Limited - Thailand
- Eastern Energy - Thailand
- Borneo Indobara - Indonesia
- Makarim & Taira - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Power Finance Corporation Ltd., India
- Kepco SPC Power Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Semirara Mining Corp, Philippines
- Salva Resources Pvt Ltd - India
- Parliament of New Zealand
- Kapuas Tunggal Persada - Indonesia
- Xindia Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Trasteel International SA, Italy
- Sarangani Energy Corporation, Philippines
- Heidelberg Cement - Germany
- Global Green Power PLC Corporation, Philippines
- GVK Power & Infra Limited - India
- IHS Mccloskey Coal Group - USA
- Wilmar Investment Holdings
- Interocean Group of Companies - India
- Africa Commodities Group - South Africa
- McConnell Dowell - Australia
- PTC India Limited - India
- Dalmia Cement Bharat India
- Planning Commission, India
- Jorong Barutama Greston.PT - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Oldendorff Carriers - Singapore
- Cement Manufacturers Association - India
- Barasentosa Lestari - Indonesia
- Electricity Authority, New Zealand
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- Thiess Contractors Indonesia
- Pendopo Energi Batubara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Directorate General of MIneral and Coal - Indonesia
- VISA Power Limited - India
- Ministry of Transport, Egypt
- Leighton Contractors Pty Ltd - Australia
- Rio Tinto Coal - Australia
- Formosa Plastics Group - Taiwan
- Rashtriya Ispat Nigam Limited - India
- Bhatia International Limited - India
- Binh Thuan Hamico - Vietnam
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- Larsen & Toubro Limited - India
- Energy Development Corp, Philippines
- Price Waterhouse Coopers - Russia
- Petron Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
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