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