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