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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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- Leighton Contractors Pty Ltd - Australia
- Indo Tambangraya Megah - Indonesia
- Baramulti Group, Indonesia
- McConnell Dowell - Australia
- Kepco SPC Power Corporation, Philippines
- PowerSource Philippines DevCo
- Directorate General of MIneral and Coal - Indonesia
- CIMB Investment Bank - Malaysia
- Standard Chartered Bank - UAE
- Gujarat Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Riau Bara Harum - Indonesia
- Power Finance Corporation Ltd., India
- San Jose City I Power Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Ceylon Electricity Board - Sri Lanka
- Sree Jayajothi Cements Limited - India
- Ministry of Mines - Canada
- Medco Energi Mining Internasional
- Sindya Power Generating Company Private Ltd
- Neyveli Lignite Corporation Ltd, - India
- White Energy Company Limited
- Borneo Indobara - Indonesia
- Indogreen Group - Indonesia
- Latin American Coal - Colombia
- SMG Consultants - Indonesia
- Mjunction Services Limited - India
- Eastern Coal Council - USA
- Global Coal Blending Company Limited - Australia
- PNOC Exploration Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Singapore Mercantile Exchange
- Aboitiz Power Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- Jorong Barutama Greston.PT - Indonesia
- Videocon Industries ltd - India
- Jindal Steel & Power Ltd - India
- Tata Chemicals Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Manunggal Multi Energi - Indonesia
- Savvy Resources Ltd - HongKong
- Maharashtra Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- Ind-Barath Power Infra Limited - India
- Anglo American - United Kingdom
- Eastern Energy - Thailand
- Parry Sugars Refinery, India
- Energy Link Ltd, New Zealand
- Wood Mackenzie - Singapore
- The Treasury - Australian Government
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- Toyota Tsusho Corporation, Japan
- Semirara Mining and Power Corporation, Philippines
- Ministry of Finance - Indonesia
- Barasentosa Lestari - Indonesia
- PTC India Limited - India
- Australian Coal Association
- SMC Global Power, Philippines
- Orica Mining Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- ASAPP Information Group - India
- India Bulls Power Limited - India
- Central Electricity Authority - India
- Romanian Commodities Exchange
- Timah Investasi Mineral - Indoneisa
- Africa Commodities Group - South Africa
- Coalindo Energy - Indonesia
- Vedanta Resources Plc - India
- Deloitte Consulting - India
- Sakthi Sugars Limited - India
- Metalloyd Limited - United Kingdom
- Renaissance Capital - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Ambuja Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Makarim & Taira - Indonesia
- Formosa Plastics Group - Taiwan
- The University of Queensland
- GMR Energy Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Carbofer General Trading SA - India
- IEA Clean Coal Centre - UK
- Siam City Cement PLC, Thailand
- Meenaskhi Energy Private Limited - India
- Coal and Oil Company - UAE
- Jaiprakash Power Ventures ltd
- Maheswari Brothers Coal Limited - India
- Holcim Trading Pte Ltd - Singapore
- Semirara Mining Corp, Philippines
- Simpson Spence & Young - Indonesia
- Port Waratah Coal Services - Australia
- Grasim Industreis Ltd - India
- Indian Energy Exchange, India
- Electricity Authority, New Zealand
- Parliament of New Zealand
- Lanco Infratech Ltd - India
- Mercuria Energy - Indonesia
- Independent Power Producers Association of India
- Merrill Lynch Commodities Europe
- Bulk Trading Sa - Switzerland
- London Commodity Brokers - England
- Global Green Power PLC Corporation, Philippines
- Rio Tinto Coal - Australia
- Antam Resourcindo - Indonesia
- Binh Thuan Hamico - Vietnam
- Heidelberg Cement - Germany
- South Luzon Thermal Energy Corporation
- Electricity Generating Authority of Thailand
- The State Trading Corporation of India Ltd
- Price Waterhouse Coopers - Russia
- Sarangani Energy Corporation, Philippines
- Orica Australia Pty. Ltd.
- Energy Development Corp, Philippines
- Sojitz Corporation - Japan
- Globalindo Alam Lestari - Indonesia
- Trasteel International SA, Italy
- Kumho Petrochemical, South Korea
- AsiaOL BioFuels Corp., Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- TeaM Sual Corporation - Philippines
- Bhoruka Overseas - Indonesia
- LBH Netherlands Bv - Netherlands
- Mercator Lines Limited - India
- Australian Commodity Traders Exchange
- Malabar Cements Ltd - India
- Economic Council, Georgia
- Gujarat Mineral Development Corp Ltd - India
- Larsen & Toubro Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Pipit Mutiara Jaya. PT, Indonesia
- Dalmia Cement Bharat India
- Kartika Selabumi Mining - Indonesia
- Chamber of Mines of South Africa
- Mintek Dendrill Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Attock Cement Pakistan Limited
- Bukit Baiduri Energy - Indonesia
- Edison Trading Spa - Italy
- Agrawal Coal Company - India
- Central Java Power - Indonesia
- Madhucon Powers Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Wilmar Investment Holdings
- Gujarat Sidhee Cement - India
- Pendopo Energi Batubara - Indonesia
- New Zealand Coal & Carbon
- Ministry of Transport, Egypt
- Iligan Light & Power Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement - Thailand
- Essar Steel Hazira Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Commonwealth Bank - Australia
- Xindia Steels Limited - India
- Petron Corporation, Philippines
- Thiess Contractors Indonesia
- Indika Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Uttam Galva Steels Limited - India
- Bangladesh Power Developement Board
- Goldman Sachs - Singapore
- Therma Luzon, Inc, Philippines
- Banpu Public Company Limited - Thailand
- Chettinad Cement Corporation Ltd - India
- GVK Power & Infra Limited - India
- Star Paper Mills Limited - India
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate Of Revenue Intelligence - India
- ICICI Bank Limited - India
- Kideco Jaya Agung - Indonesia
- Thai Mozambique Logistica
- Marubeni Corporation - India
- Cement Manufacturers Association - India
- Interocean Group of Companies - India
- Bayan Resources Tbk. - Indonesia
- Samtan Co., Ltd - South Korea
- Bukit Asam (Persero) Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indian Oil Corporation Limited
- CNBM International Corporation - China
- VISA Power Limited - India
- Straits Asia Resources Limited - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- IHS Mccloskey Coal Group - USA
- Global Business Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Sical Logistics Limited - India
- Posco Energy - South Korea
- Altura Mining Limited, Indonesia
- Planning Commission, India
- GAC Shipping (India) Pvt Ltd
- Aditya Birla Group - India
- Miang Besar Coal Terminal - Indonesia
- Vizag Seaport Private Limited - India
- Salva Resources Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Minerals Council of Australia
- Petrochimia International Co. Ltd.- Taiwan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Georgia Ports Authority, United States
- OPG Power Generation Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Bhushan Steel Limited - India
- MS Steel International - UAE
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