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