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