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