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