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