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