We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Wednesday, 20 November 19
FOREIGN DIRECT INVESTMENTS IN COMMERCIAL COAL MINING IN INDIA? - DIPESH DIPU
 In August 2019, Government of India announced its approval for Foreign Direct Investment (FDI) for coal mining, processing and sale. Not that FDI in coal mining sector was new, but novelty in that was that government now permitted foreign ownership of coal mines for commercial sale of coal produced from such mines. He justifications provided by government sources included need for competition in a sector that has been traditionally dominated by government-owned companies Coal India Limited and Singareni Collieries Company Limited; need for enhanced production as here has been shortfall in meeting demand; and, need for newer technologies that may bring in sustainability to coal mining. These indeed are commendable objectives and opening up the sector for foreign participation may certainly be considered a step in the right direction. However, public policy needs to be grounded in realism, and the reality of attractiveness of commercial coal mining in India does not bode well for foreign participation.
The response of government-owned companies for coal blocks on offer for allotment for commercial coal mining was announced in early August 2019 provides the evidence. Nine coal blocks were put on offer for sale of coal in markets and the eligibility for these were restricted to government-owned companies including the state government-owned ones. There were, however, only three coal blocks[1] that received applications by NMDC Limited, Jharkhand State Mineral Development Corporation and Madhya Pradesh State Mining Corporation. This lukewarm response may indicate towards the market sentiments for commercial coal mining in India. It must also be considered here that the coal blocks for allotment for government-owned companies do not have the two-stage auction based bidding for winning the blocks and, thus, the pay-out required to win these coal blocks may be lower in comparison to coal blocks put out for auctions. So, even with lower additional pay-out to government in the form of premium the coal blocks have not found many takers. There may be several underlying economic reasons, which are amplified for foreign participants, and thus, require consideration to evaluate if this approval for FDI in commercial coal mining would have any impact and if it would meet its stated objectives.
The first and the foremost is the economic feasibility of these mines. The foreign, and indeed any private company, would have to participate in auction process for winning a coal block, and commit to a competitive premium to access the resources. This has been an impediment for private sector participation in India, given the evidence of coal blocks awarded for captive consumption in power and non-regulated sectors that include cement, steel and other approved end users. There seems to be some sanity dawning on participants on these auction with every successive rounds of auction, seen from the lower winning premiums, and hence, it may be expected that the trend may continue. Nonetheless, the premium will certainly erode the margins for commercial miners, the extent of this erosion would be a function of degree of competition for the coal blocks. The margins are also likely to be uncertain in view of the price volatility of coal, which in Indian market is pegged with CIL price and a certain premium that reflects typically the discount that IL prices tend to have over energy-equivalent international prices. This uncertainty of prices is likely to be confounded by the uncertainty in demand-supply gap that these commercial miners are required to fulfil. There has been a shortfall in supply in the recent past, evident from the rise in coal imports in the last two years even with the stated objective of the government to reduce coal imports. This may present itself as an opportunity. However, the question is whether this shortfall is likely to sustain, and thus, create a marketplace for commercial miners. With a slump in thermal power generation and nearly absent pipeline of new coal based projects, this assumption may be quite a big one to make and decide in favour of making foreign direct investment in Indian coal mining.
Other important risks pertain to project execution. There have been several impediments in coal mining project implementations, such as procurement of licenses and permits, acquisition of land and rehabilitation and resettlement of project affected people. These, apart from the procedural challenges, involve risk of reputation. Business practices on all these accounts in mining sector have often been marred with controversies and have led to perceptions of externalities in these processes having significant influence on the outcomes. Foreign participants in Indian mining have been wary of these, and hence, have had little success to show even though they have had offices and a few exploration and contract mining projects in India. Apart from reputation, the risks in procurement of licenses and land acquisition create the risks of project delays, which may then translate into cost escalations, thereby impacting project economics. Coal mining projects may have such challenges in attracting foreign direct investment.
There are challenges of talent shortage and financing as well. Innovative technologies that the foreign miners are likely to bring in India will require high quality geo-statisticians, geologists, mine planners and mining engineers. India does produce graduates in these areas of study but quantities do no necessarily reflect quality, which are further compounded by the brain drain of talent into other industries, primarily, information technology. Mining industry in general, and coal mining in particular, has not been able to retain relent in the last decade or so, with advent of opportunities for the smart geoscientists and engineers in alternate industries. Foreign mining companies may find this crippling.
There are challenges in financing too. Coal mining projects may have been good candidates for resource-based financing, but that has not happened on account of several factors, not the least of those being dominance of government-owned companies priding themselves on debt-free balance sheets, and the quality of geological information that may be inferior to global standards. The market for debt for coal mining then often reduces itself to equipment financing with the equipment being securitised to the lenders. Globally preferred model of equipment leasing is still in its relatively early stages of comprehension and acceptance in Indian mining. With limited options of raising finances, the higher degree of equity investments may also be a deterrent for foreign investors as the may have comparable projects competing for scarce capital.
Coal mining industry has been on a downward spiral globally. Foreign large miners have divested or are divesting their stakes in coal projects. Global bankers have committed themselves to not financing coal and coal based power projects. Insurance companies are shying away from coal projects too. The ecosystem for coal mining project execution is dying. Epitaphs are being written on coal and its demise is predicted by governments, investors and policy analysts wold over. But for the coal addiction of Asia, China and India in particular, the demise may have been sooner. Under such gloomy outlook for the industry, with coal mining companies filing for bankruptcies frequently, it would be tough to get these foreign companies to look at Indian destinations favourably. An industry staring at terminal decline may not witness new investors, and old ones that may have been facing severe challenges in their home countries to look out for opportunities in India.
Optimism at this point of time of foreign miners participating in Indian coal mining sector, that presents a challenging business environment, may be misplaced. Only when the government calls for applications for coal blocks for sale of coal with permitted participation for foreign direct investment that the final picture shall emerge.
By Dipesh Dipu
Energy, Natural Resources and Infrastructure Expert
This article originaly published on economictimes and Linkedin
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Friday, 06 September 24
REBOUND IN OIL DEMAND COULD LIFT MARKET IN LATTER HALF OF 2024 - BIMCO
Supply/demand
Based on a strong second half demand, the supply/balance is forecast to strengthen in 2024 but weaken slightly in 2025 as n ...
Friday, 06 September 24
GLOBAL SEABORNE LNG TRADE HAS CONTINUED TO INCREASE LAST YEAR - BANCHERO COSTA
Global seaborne LNG trade has continued to increase last year, helped also by the events in Ukraine which forced Europe to diversify away from Russ ...
Wednesday, 28 August 24
SEABORNE COAL IMPORTS INTO INDIA INCREASED BY +9.9% Y-O-Y TO 146.6 MLN T - BANCHERO COSTA
Global coal trade has really picked up pace over the past year, and is now fully back to pre-Covid levels said Banchero Costa Research in its lates ...
Tuesday, 06 August 24
EXERCISE CAUTION WITH AMMONIA SWITCH - BALTIC EXCHANGE
A new study from the Massachusetts Institute of Technology (MIT) has thrown a spanner into the plan to transition ships from diesel fuel to ammonia ...
Friday, 02 August 24
ENERGY MARKET DEVELOPMENTS: COAL AND NATURAL GAS PRICES REACH RECORD HIGHS - WORLD BANK
The recent surge in natural gas and coal prices has been so swift that the main benchmarks were roughly three times higher in 2022Q2 compared to a ...
|
|
|
Showing 1 to 5 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Goldman Sachs - Singapore
- Metalloyd Limited - United Kingdom
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- Bayan Resources Tbk. - Indonesia
- Salva Resources Pvt Ltd - India
- Videocon Industries ltd - India
- Global Green Power PLC Corporation, Philippines
- Posco Energy - South Korea
- Carbofer General Trading SA - India
- Globalindo Alam Lestari - Indonesia
- Georgia Ports Authority, United States
- Holcim Trading Pte Ltd - Singapore
- Bukit Makmur.PT - Indonesia
- Eastern Coal Council - USA
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Wilmar Investment Holdings
- Sinarmas Energy and Mining - Indonesia
- Oldendorff Carriers - Singapore
- Antam Resourcindo - Indonesia
- Africa Commodities Group - South Africa
- Samtan Co., Ltd - South Korea
- Australian Coal Association
- Global Business Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- New Zealand Coal & Carbon
- Ambuja Cements Ltd - India
- London Commodity Brokers - England
- Binh Thuan Hamico - Vietnam
- Merrill Lynch Commodities Europe
- Medco Energi Mining Internasional
- Neyveli Lignite Corporation Ltd, - India
- Xindia Steels Limited - India
- Kapuas Tunggal Persada - Indonesia
- Larsen & Toubro Limited - India
- Kohat Cement Company Ltd. - Pakistan
- ASAPP Information Group - India
- Coalindo Energy - Indonesia
- Ministry of Mines - Canada
- The University of Queensland
- Ministry of Finance - Indonesia
- Coal and Oil Company - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Romanian Commodities Exchange
- IEA Clean Coal Centre - UK
- Manunggal Multi Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- Thiess Contractors Indonesia
- Riau Bara Harum - Indonesia
- European Bulk Services B.V. - Netherlands
- Deloitte Consulting - India
- South Luzon Thermal Energy Corporation
- Energy Link Ltd, New Zealand
- Gujarat Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- ICICI Bank Limited - India
- Kartika Selabumi Mining - Indonesia
- SMG Consultants - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Central Java Power - Indonesia
- Grasim Industreis Ltd - India
- White Energy Company Limited
- LBH Netherlands Bv - Netherlands
- Sree Jayajothi Cements Limited - India
- Straits Asia Resources Limited - Singapore
- Commonwealth Bank - Australia
- Ceylon Electricity Board - Sri Lanka
- Coastal Gujarat Power Limited - India
- Latin American Coal - Colombia
- Chettinad Cement Corporation Ltd - India
- Parliament of New Zealand
- Indogreen Group - Indonesia
- Madhucon Powers Ltd - India
- Aditya Birla Group - India
- Indo Tambangraya Megah - Indonesia
- Sojitz Corporation - Japan
- CIMB Investment Bank - Malaysia
- Electricity Authority, New Zealand
- Central Electricity Authority - India
- Planning Commission, India
- Gujarat Mineral Development Corp Ltd - India
- Trasteel International SA, Italy
- GAC Shipping (India) Pvt Ltd
- Aboitiz Power Corporation - Philippines
- Star Paper Mills Limited - India
- Formosa Plastics Group - Taiwan
- PowerSource Philippines DevCo
- Edison Trading Spa - Italy
- GVK Power & Infra Limited - India
- Kideco Jaya Agung - Indonesia
- Marubeni Corporation - India
- Rashtriya Ispat Nigam Limited - India
- Billiton Holdings Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Karaikal Port Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Minerals Council of Australia
- Siam City Cement PLC, Thailand
- Indian Energy Exchange, India
- Cigading International Bulk Terminal - Indonesia
- Lanco Infratech Ltd - India
- Orica Mining Services - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Agrawal Coal Company - India
- Malabar Cements Ltd - India
- Bhushan Steel Limited - India
- Siam City Cement - Thailand
- Banpu Public Company Limited - Thailand
- Petron Corporation, Philippines
- Jindal Steel & Power Ltd - India
- PNOC Exploration Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- McConnell Dowell - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Maheswari Brothers Coal Limited - India
- Heidelberg Cement - Germany
- Power Finance Corporation Ltd., India
- PetroVietnam Power Coal Import and Supply Company
- Energy Development Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Jaiprakash Power Ventures ltd
- Ind-Barath Power Infra Limited - India
- Savvy Resources Ltd - HongKong
- Interocean Group of Companies - India
- Baramulti Group, Indonesia
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Attock Cement Pakistan Limited
- Australian Commodity Traders Exchange
- The State Trading Corporation of India Ltd
- Tata Chemicals Ltd - India
- Mercuria Energy - Indonesia
- CNBM International Corporation - China
- Bulk Trading Sa - Switzerland
- Bukit Asam (Persero) Tbk - Indonesia
- Meralco Power Generation, Philippines
- Intertek Mineral Services - Indonesia
- Bhoruka Overseas - Indonesia
- MS Steel International - UAE
- Alfred C Toepfer International GmbH - Germany
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Oil Corporation Limited
- Port Waratah Coal Services - Australia
- Pendopo Energi Batubara - Indonesia
- Electricity Generating Authority of Thailand
- Cement Manufacturers Association - India
- Karbindo Abesyapradhi - Indoneisa
- Semirara Mining Corp, Philippines
- Barasentosa Lestari - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Bukit Baiduri Energy - Indonesia
- Chamber of Mines of South Africa
- Mjunction Services Limited - India
- Vedanta Resources Plc - India
- Economic Council, Georgia
- Indonesian Coal Mining Association
- Rio Tinto Coal - Australia
- Kaltim Prima Coal - Indonesia
- Global Coal Blending Company Limited - Australia
- Thai Mozambique Logistica
- Sarangani Energy Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Wood Mackenzie - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- Dalmia Cement Bharat India
- The Treasury - Australian Government
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- San Jose City I Power Corp, Philippines
- Indika Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SMC Global Power, Philippines
- Independent Power Producers Association of India
- Orica Australia Pty. Ltd.
- Vizag Seaport Private Limited - India
- Altura Mining Limited, Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Borneo Indobara - Indonesia
- Bangladesh Power Developement Board
- Mintek Dendrill Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Uttam Galva Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Standard Chartered Bank - UAE
- Sical Logistics Limited - India
- Sakthi Sugars Limited - India
- Kepco SPC Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Eastern Energy - Thailand
- Iligan Light & Power Inc, Philippines
- Therma Luzon, Inc, Philippines
- Tamil Nadu electricity Board
- Bhatia International Limited - India
- Gujarat Sidhee Cement - India
- Anglo American - United Kingdom
- TeaM Sual Corporation - Philippines
- Kumho Petrochemical, South Korea
- Meenaskhi Energy Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Parry Sugars Refinery, India
- VISA Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- Simpson Spence & Young - Indonesia
- PTC India Limited - India
- Bharathi Cement Corporation - India
- Singapore Mercantile Exchange
- Mercator Lines Limited - India
|
| |
| |
|
1 