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