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