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