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