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Friday, 07 October 11
MINING REGULATIONS , OBSTACLES AND GROWTH : INDIA VS INDONESIA - SUNIL K KUMBHAT
 COALspot.com - The Govt of India has passed long pending Mines & Minerals (Regulation and Development) Bill, 2011, which seeks to replace 1957 act governing mining sector .The bill is now subject to final approval by Indian Parliament.
Indian New Mining Bill
This landmark draft bill that allows local people to get the financial benefits of mining activities. Bill smoothens land acquisitions through higher compensation to people displaced and simplifies relief and rehabilitation issues.
Inadequate compensation and the fear of loss of livelihood have often lead to violent protests by people displaced by mining and related industries, blocking acquisitions of land for several upcoming Mega projects.
The bill, requires coal mining companies to pay 26 per cent of their Profit after Tax to “district mineral foundations” (DMFs), to the district administrations. Funds collected by district collectors will be spent on development projects for the locals, mainly tribal communities residing in the mining areas. In the case of non-coal miners 100 % payment equivalent to royalty required to be paid to state government to affected persons.
If the bill is enacted (which is a big question mark), an estimated amount of US$ 2.04 billion (approx) will be generated per year from miners and an average amount of US$ 36.75 to $ 40.84 Million will be distributed among District Mining Foundations of 60 mineral rich districts. Undoubtedly, it’s a landmark move, to provide justice to scores of tribals who have lost and continue to lose, their land and livelihood across the country due to mining activities.
It is expected that this bill be strong enough to crush the biggest devil of all - the ill-legal mining.
The Bill addresses the burning issue of illegal mining, as it provides for setting up a regulatory authority (National Mining Regulatory Development Authority) to govern the sector. It will have powers to investigate and prosecute the offenders. The authority would also be empowered to look into the cases of organised illegal mining.
This move may not attract private investment in the mining sector, which is badly needed. The mining activity will come down so also production, which Indian economy cannot afford.
The move is all set to push down profits of major mining and power companies, mainly Coal Indian Ltd. Coal India, which will be hit the most as it will have to share 26% of its profit, which means lesser funds available for further mine development for growth, higher production, and distribution of dividends.
Coal India will be left with no Choice but to pass the burden to its customers.
Environmental Consciousness
The environmental impact of mining operations in India is under sharp scrutiny than many other countries. Environmental consciousness is increasing in India.
If environmental issues & challenges are left unmitigated, it will inevitably affect the poorest, rendering trade unsustainable. The moot point is how to ensure the benefits of trade percolate down to the bottom. There is a worldwide increase in globalised economic activity, huge environmental degradation and widening income inequality. So achieving sustainable development will critically depend on proactive resolution of the issues at domestic and international levels.
Never before India has such a high demand for coal, so also environmental consciousness been so high. Both are legitimate & serious issues But the solution is not to clamp down on coal production. India’s soaring energy need is vital for its industrial growth.
India's increasing energy needs are being hampered by regulatory delays for coal mining projects. Sometime back Govt of India (Environment and Forests Ministry) announced many Coal fields as “NO –GO” zones, which is seriously effecting Coal mining projects and Coal production.
In last 4-5 few years there is huge demand of thermal Coal and considering the planned Capacity building in Energy sector there would be hue and cry for Coal demand unless there is substantial increase of Coal Production in India.
Although India is considered as fifth-largest coal reserves in the world much of it is under protected forests and so mining projects face fierce environmental scrutiny.
There is so much hue and cries over the forest conservation. Coal is nature's gift & treasure and coal mines can’t be shifted to another area due to regulatory issues. There is a urgent need to re-examine the regulations and policies associated with exploration and production. Various government regulations concerning forestry and environmental restrictions are hindering mine development. Unless such bottlenecks are addressed, growth in domestic coal production will not match the higher demand.
Independent Regulator
The long term growth of the coal sector in India requires a confident and renewed mindset in developing coal resources through decontrol of the Coal sector, establishment of an independent regulator.
The time has come for Govt of India to establish technically-competent and independent regulators for coal, iron ore and other minerals. The regulators should draw up the necessary regulations and enforcing them strictly, de-politicise the sector and minimise violations of environmental laws and the rights of Local peoples.
Government thru its regulator should ensure that its policy framework attracts large, organised, technologically well-equipped and socially - and environmentally-conscious mining companies which are more susceptible to public pressure and less prone to corrupt and illegal business operating practices. Such companies could effectively develop those mineral reserves which lie either under forest cover or lands populated by local peoples without causing environmental or social damage.
The regulator will have the responsibility of allocating coal mines, price fixation and revision; and performance standards-setting and enforcement, pricing of coal washing, washed coal and by-products generated during the process among other things.
The magnitude of growth in power generation in India will necessarily mean that coal demand will remain very strong. Coal will remain life line for Indian economy for coming many decades till 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 .
Ban on Export of Unprocessed Coal from Indonesia
Recently Govt of Indonesia announced its plan to ban the export of unprocessed and unrefined Coal / Mining products from January 2014.
In its current form, the Draft Value Added Regulation envisages that, starting from January 2014, it will no longer be possible to export Coal from Indonesia having calorific value of 5700 kcal/kg GAD or below.
The proposed ban on exports of coal under the 5,700-kcal/kg will change the dynamics of the global thermal coal market, which has seen spiraling demand from China and India. Such a ban will have a substantial impact on the thermal coal market, as large amounts of low-quality coal from Indonesia are exported to India and China.
Coal quality of 4500 and 5,700 kcal/kg, constitutes a significant portion of exports out of Indonesia and, considering the country accounts for about 30 per cent of the global thermal coal supply, an export ban could reduce worldwide supplies by at least 10-15 per cent.
India is already one of the largest buyers of coal from Indonesia, and continue to maintain this position considering the growth in domestic demand and stagnating production of major miners such as Coal India Ltd. There will be an overall impact on the Indian power sector, as currently about 60 per cent of the total thermal coal imports are coming from Indonesia.
The Draft Regulation raises many challenging issues including, most importantly, how appropriate and realistic is a tough domestic processing and refining obligation in a country like Indonesia. The 5700 kcal/kg GAD minimum upgrading requirement only makes sense if, by 2014, coal upgrading will be a proven technology, widely available to all Indonesian producers of low grade coal.
In the absence of widespread coal upgrading cost effective technology, this could prevent the export from Indonesia of up to 150-175 million metric tons of low grade coal and Govt’s true policy objectives behind the proposed Draft Value Added Regulation requires detailed & critical analysis.
Role of Indonesia
As the situation stands today, India could become the world’s biggest thermal coal importer by 2015 and Indonesia would be one of the Countries to take care of bulk of coal requirement.
India is today one of the fastest growing economies and also has a shortage of power supply. Indonesia is one of the peaceful countries with huge natural resources and exporting coal to many countries for use in power plants for generating energy but it is paradoxical that Indonesia is short of energy. Many Indian companies are capable of sharing power technology and setting up mega power plants in Indonesia
Indonesian private companies can buy equity stakes in India’s power plants in exchange for long-term coal supply. Since India is today one of the fastest growing economies and also has a shortage of power supply then such deals can be beneficial to both parties
Indonesia requires huge investment from foreign investors in infrastructure, Power Generation, Oil & Gas exploration, telecom sector, Port and Rapid transport system. So it is essential to have transparency in all regulations, Legal system and improvement in corporate Governance.
Indonesia's mining industry is undergoing a regulatory overhaul which may weaken the operating health and financial performance of many domestic mining companies.
Besides increased operating uncertainty the new regulations of recent past & proposed may also make the mining industry less attractive to foreign investors. lack of transparency in the legal process and the risk of regulatory duplication and inconsistencies will continue to act as deterrents to substantial investment ,specially foreign direct investments (FDI).
While developed economies struggle with global financial crisis and slowdown of demand, Indonesia (together China and India) could be the consumer market for the future. Similar to China and India, urbanisation is an important driver of Indonesia’s growth. Indonesia is ready to rise in the world economic hierarchy and take its place alongside China and India. Indonesia is now perceived as one of new Asian Tigers , even altering the term of BRIC into BRIIC ( Brazil , Russia , Indonesia , India and China)
Whether BRIC will become BRIIC is yet to be seen. Indonesia is the third fastest growing economy in Asia, behind India and China. It has passed through the economic crisis with firmness unmatched elsewhere in the region and indeed in the world. (cs)
Views expressed herein are personal views of the author and not that of COALspot.com.
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Monday, 20 June 11
5TH ASIA PACIFIC COAL TRADING & INVESTMENT OUTLOOK 2011 IS ON THE WAY
Press Release - Since the beginning of 2011, international commodity price has been in a high level, resulting in “TENSION” of energy co ...
Sunday, 19 June 11
S6 AND S7 ROUTES LIKELY TO BE SOFT NEXT WEEK - VISTAAR
COALspot.com - The freight market seemed to be stabilizing and the BDI and Cape index was up marginally and closed at 1,423 points and 1,824 points ...
Sunday, 19 June 11
BUMI 1Q NET PROFIT INCREASES 16.5 PERCENT
PT Bumi Resources Tbk (BUMI), Indonesia's largest coal exporter that is 25% owned by London-listed Vallar Plc, reported a16.49% increase in net pro ...
Friday, 17 June 11
DRY BULK BREATHES SIGH OF RELEAF ON RENEWED CAPESIZE DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has caught a sign of relief from the middle of the week onwards, as the BDI (Baltic Dry Index) increased once again yesterday, t ...
Thursday, 16 June 11
BOOSTING THE USE OF LOW CARBON ENERGY FOR A BETTER WORLD
Bali, Indonesia host of world renewable energy congress – Indonesia, international conference & exhibition on renewable energy and energy ...
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- Binh Thuan Hamico - Vietnam
- Electricity Generating Authority of Thailand
- Directorate Of Revenue Intelligence - India
- Semirara Mining and Power Corporation, Philippines
- Planning Commission, India
- Kepco SPC Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- ICICI Bank Limited - India
- Bukit Makmur.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Sindya Power Generating Company Private Ltd
- VISA Power Limited - India
- GVK Power & Infra Limited - India
- Orica Australia Pty. Ltd.
- CNBM International Corporation - China
- Aditya Birla Group - India
- Kideco Jaya Agung - Indonesia
- The University of Queensland
- Bahari Cakrawala Sebuku - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Oldendorff Carriers - Singapore
- Indonesian Coal Mining Association
- South Luzon Thermal Energy Corporation
- Alfred C Toepfer International GmbH - Germany
- Wilmar Investment Holdings
- SN Aboitiz Power Inc, Philippines
- Semirara Mining Corp, Philippines
- New Zealand Coal & Carbon
- Mercator Lines Limited - India
- Xindia Steels Limited - India
- Bhatia International Limited - India
- Posco Energy - South Korea
- Georgia Ports Authority, United States
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Power Finance Corporation Ltd., India
- Pipit Mutiara Jaya. PT, Indonesia
- Ambuja Cements Ltd - India
- Uttam Galva Steels Limited - India
- Toyota Tsusho Corporation, Japan
- Coal and Oil Company - UAE
- Africa Commodities Group - South Africa
- Eastern Energy - Thailand
- Coalindo Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Savvy Resources Ltd - HongKong
- The Treasury - Australian Government
- Formosa Plastics Group - Taiwan
- IEA Clean Coal Centre - UK
- Trasteel International SA, Italy
- Thai Mozambique Logistica
- Kartika Selabumi Mining - Indonesia
- Timah Investasi Mineral - Indoneisa
- LBH Netherlands Bv - Netherlands
- Port Waratah Coal Services - Australia
- Kumho Petrochemical, South Korea
- Globalindo Alam Lestari - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Renaissance Capital - South Africa
- Global Business Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Australian Coal Association
- Leighton Contractors Pty Ltd - Australia
- GMR Energy Limited - India
- Grasim Industreis Ltd - India
- Medco Energi Mining Internasional
- Gujarat Electricity Regulatory Commission - India
- Kaltim Prima Coal - Indonesia
- Independent Power Producers Association of India
- Deloitte Consulting - India
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- PowerSource Philippines DevCo
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Coal Blending Company Limited - Australia
- Singapore Mercantile Exchange
- Sree Jayajothi Cements Limited - India
- Pendopo Energi Batubara - Indonesia
- Baramulti Group, Indonesia
- Rio Tinto Coal - Australia
- Makarim & Taira - Indonesia
- Gujarat Sidhee Cement - India
- Indian Oil Corporation Limited
- Holcim Trading Pte Ltd - Singapore
- CIMB Investment Bank - Malaysia
- Miang Besar Coal Terminal - Indonesia
- Attock Cement Pakistan Limited
- Rashtriya Ispat Nigam Limited - India
- Jaiprakash Power Ventures ltd
- Energy Development Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tata Chemicals Ltd - India
- Vedanta Resources Plc - India
- Antam Resourcindo - Indonesia
- Petron Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Bhoruka Overseas - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bharathi Cement Corporation - India
- Star Paper Mills Limited - India
- Videocon Industries ltd - India
- Goldman Sachs - Singapore
- Salva Resources Pvt Ltd - India
- White Energy Company Limited
- Tamil Nadu electricity Board
- Price Waterhouse Coopers - Russia
- Romanian Commodities Exchange
- Karbindo Abesyapradhi - Indoneisa
- Eastern Coal Council - USA
- Edison Trading Spa - Italy
- Intertek Mineral Services - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Ind-Barath Power Infra Limited - India
- Indian Energy Exchange, India
- International Coal Ventures Pvt Ltd - India
- Wood Mackenzie - Singapore
- Indika Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- Chettinad Cement Corporation Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Baiduri Energy - Indonesia
- Thiess Contractors Indonesia
- Bayan Resources Tbk. - Indonesia
- Carbofer General Trading SA - India
- Kalimantan Lumbung Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- IHS Mccloskey Coal Group - USA
- GAC Shipping (India) Pvt Ltd
- Cigading International Bulk Terminal - Indonesia
- SMC Global Power, Philippines
- PTC India Limited - India
- Straits Asia Resources Limited - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- London Commodity Brokers - England
- Parry Sugars Refinery, India
- Orica Mining Services - Indonesia
- Central Electricity Authority - India
- Manunggal Multi Energi - Indonesia
- Mjunction Services Limited - India
- Bhushan Steel Limited - India
- Indo Tambangraya Megah - Indonesia
- San Jose City I Power Corp, Philippines
- ASAPP Information Group - India
- Borneo Indobara - Indonesia
- Maheswari Brothers Coal Limited - India
- Minerals Council of Australia
- Vijayanagar Sugar Pvt Ltd - India
- SMG Consultants - Indonesia
- Energy Link Ltd, New Zealand
- Therma Luzon, Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- OPG Power Generation Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Sinarmas Energy and Mining - Indonesia
- Kobexindo Tractors - Indoneisa
- Meenaskhi Energy Private Limited - India
- Dalmia Cement Bharat India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Aboitiz Power Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Siam City Cement PLC, Thailand
- Anglo American - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Karaikal Port Pvt Ltd - India
- India Bulls Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Sical Logistics Limited - India
- Interocean Group of Companies - India
- Agrawal Coal Company - India
- Ministry of Finance - Indonesia
- Altura Mining Limited, Indonesia
- Malabar Cements Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Transport, Egypt
- Merrill Lynch Commodities Europe
- Simpson Spence & Young - Indonesia
- Heidelberg Cement - Germany
- Latin American Coal - Colombia
- MS Steel International - UAE
- GN Power Mariveles Coal Plant, Philippines
- The State Trading Corporation of India Ltd
- Essar Steel Hazira Ltd - India
- Bulk Trading Sa - Switzerland
- Iligan Light & Power Inc, Philippines
- Mercuria Energy - Indonesia
- Australian Commodity Traders Exchange
- Commonwealth Bank - Australia
- Central Java Power - Indonesia
- Vizag Seaport Private Limited - India
- Standard Chartered Bank - UAE
- PNOC Exploration Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Meralco Power Generation, Philippines
- Coastal Gujarat Power Limited - India
- Global Green Power PLC Corporation, Philippines
- McConnell Dowell - Australia
- Economic Council, Georgia
- Chamber of Mines of South Africa
- Sakthi Sugars Limited - India
- Indogreen Group - Indonesia
- Electricity Authority, New Zealand
- Larsen & Toubro Limited - India
- Cement Manufacturers Association - India
- Sojitz Corporation - Japan
- Madhucon Powers Ltd - India
- Siam City Cement - Thailand
- Bangladesh Power Developement Board
- Ministry of Mines - Canada
- Metalloyd Limited - United Kingdom
- Marubeni Corporation - India
- Parliament of New Zealand
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