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.
|
|
Tuesday, 07 January 20
CLEANER AIR IN 2020: 0.5% SULPHUR CAP FOR SHIPS ENTERS INTO FORCE WORLDWIDE - EUROPEAN COMMISSION
From 1 January 2020, the maximum sulphur content of marine fuels is reduced to 0.5% (down from 3.5%) globally – reducing air pollution and pr ...
Tuesday, 07 January 20
BHP EYES INDIA FOR COAL GROWTH AS CHINA DEMAND FLATLINES - SYDNEY MORNING HERALD
Australia’s largest miner, BHP, believes the long-term trajectory of the emerging economy of India and the acceleration of its steelmaking ou ...
Sunday, 05 January 20
BUNKER QUALITY CLAIMS IN 2020 - ISSUES TO CONSIDER - CLYDE&CO
KNOWLEDGE TO ELEVATE
In recent years the shipping industry has faced a significant number of bunker quality claims, most notably ari ...
Saturday, 04 January 20
SUPRAMAX: A 53,000DWT VESSEL FIXING DELIVERY INDONESIA TRIP TO CHINA AT $4,000 AND A 58,000DWT SHIP FIXING DELIVERY EAST KALIMANTAN TRIP TO THAILAND AT $5,500 - BALTIC BRIEFING
Capesize
The New Year started with an erosion on pre-Christmas rates as the higher low sulphur fuel costs due to IMO 2020 affected levels. From ...
Thursday, 02 January 20
DMO 2020 PRICE SET FOR ELECTRICITY SECTOR - IAN WOLLFF
On the 26th December 2019, the Minister of Energy and Mineral Resources (ESDM) issued the decree No. 261.K/30.MEM/2019 about the States needs for c ...
|
|
|
Showing 1211 to 1215 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- IEA Clean Coal Centre - UK
- Price Waterhouse Coopers - Russia
- Gujarat Sidhee Cement - India
- Australian Coal Association
- Siam City Cement - Thailand
- Siam City Cement PLC, Thailand
- Sinarmas Energy and Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Sree Jayajothi Cements Limited - India
- Vedanta Resources Plc - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Business Power Corporation, Philippines
- Deloitte Consulting - India
- Port Waratah Coal Services - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kapuas Tunggal Persada - Indonesia
- Uttam Galva Steels Limited - India
- Jindal Steel & Power Ltd - India
- Mintek Dendrill Indonesia
- Rashtriya Ispat Nigam Limited - India
- PNOC Exploration Corporation - Philippines
- Lanco Infratech Ltd - India
- Orica Australia Pty. Ltd.
- Kepco SPC Power Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- CNBM International Corporation - China
- Leighton Contractors Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- Agrawal Coal Company - India
- OPG Power Generation Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Straits Asia Resources Limited - Singapore
- Energy Development Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Indika Energy - Indonesia
- Mercuria Energy - Indonesia
- Ministry of Mines - Canada
- Mercator Lines Limited - India
- Central Java Power - Indonesia
- Oldendorff Carriers - Singapore
- Meralco Power Generation, Philippines
- Antam Resourcindo - Indonesia
- Latin American Coal - Colombia
- Sical Logistics Limited - India
- Chamber of Mines of South Africa
- Ind-Barath Power Infra Limited - India
- Salva Resources Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Electricity Authority, New Zealand
- Bukit Makmur.PT - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Billiton Holdings Pty Ltd - Australia
- San Jose City I Power Corp, Philippines
- PowerSource Philippines DevCo
- Coalindo Energy - Indonesia
- Medco Energi Mining Internasional
- Xindia Steels Limited - India
- GMR Energy Limited - India
- Sakthi Sugars Limited - India
- Independent Power Producers Association of India
- Orica Mining Services - Indonesia
- Star Paper Mills Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cigading International Bulk Terminal - Indonesia
- Planning Commission, India
- Tamil Nadu electricity Board
- Jorong Barutama Greston.PT - Indonesia
- CIMB Investment Bank - Malaysia
- Timah Investasi Mineral - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- International Coal Ventures Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Savvy Resources Ltd - HongKong
- Jaiprakash Power Ventures ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Sojitz Corporation - Japan
- SMG Consultants - Indonesia
- Commonwealth Bank - Australia
- Indogreen Group - Indonesia
- Barasentosa Lestari - Indonesia
- Ministry of Transport, Egypt
- Parliament of New Zealand
- Global Coal Blending Company Limited - Australia
- Edison Trading Spa - Italy
- The Treasury - Australian Government
- Bhatia International Limited - India
- Altura Mining Limited, Indonesia
- ASAPP Information Group - India
- Eastern Coal Council - USA
- Grasim Industreis Ltd - India
- Power Finance Corporation Ltd., India
- Directorate Of Revenue Intelligence - India
- Bukit Asam (Persero) Tbk - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- GVK Power & Infra Limited - India
- Therma Luzon, Inc, Philippines
- Borneo Indobara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- Bangladesh Power Developement Board
- Trasteel International SA, Italy
- MS Steel International - UAE
- Toyota Tsusho Corporation, Japan
- Anglo American - United Kingdom
- Central Electricity Authority - India
- Essar Steel Hazira Ltd - India
- Tata Chemicals Ltd - India
- Indonesian Coal Mining Association
- European Bulk Services B.V. - Netherlands
- Posco Energy - South Korea
- New Zealand Coal & Carbon
- Eastern Energy - Thailand
- Gujarat Electricity Regulatory Commission - India
- Samtan Co., Ltd - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Aditya Birla Group - India
- Bayan Resources Tbk. - Indonesia
- Africa Commodities Group - South Africa
- Sarangani Energy Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- VISA Power Limited - India
- India Bulls Power Limited - India
- Bhushan Steel Limited - India
- Georgia Ports Authority, United States
- Australian Commodity Traders Exchange
- Minerals Council of Australia
- Pendopo Energi Batubara - Indonesia
- Standard Chartered Bank - UAE
- SMC Global Power, Philippines
- Manunggal Multi Energi - Indonesia
- Economic Council, Georgia
- GN Power Mariveles Coal Plant, Philippines
- Meenaskhi Energy Private Limited - India
- Attock Cement Pakistan Limited
- Metalloyd Limited - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Kobexindo Tractors - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- GAC Shipping (India) Pvt Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bharathi Cement Corporation - India
- Bukit Baiduri Energy - Indonesia
- White Energy Company Limited
- The University of Queensland
- Globalindo Alam Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Maharashtra Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- London Commodity Brokers - England
- Sindya Power Generating Company Private Ltd
- Banpu Public Company Limited - Thailand
- Aboitiz Power Corporation - Philippines
- Formosa Plastics Group - Taiwan
- IHS Mccloskey Coal Group - USA
- Coal and Oil Company - UAE
- Simpson Spence & Young - Indonesia
- Petron Corporation, Philippines
- Carbofer General Trading SA - India
- AsiaOL BioFuels Corp., Philippines
- Goldman Sachs - Singapore
- Baramulti Group, Indonesia
- Wood Mackenzie - Singapore
- Interocean Group of Companies - India
- Global Green Power PLC Corporation, Philippines
- Electricity Generating Authority of Thailand
- McConnell Dowell - Australia
- Larsen & Toubro Limited - India
- Coastal Gujarat Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- ICICI Bank Limited - India
- Indian Oil Corporation Limited
- Intertek Mineral Services - Indonesia
- South Luzon Thermal Energy Corporation
- PTC India Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Energy Exchange, India
- Kalimantan Lumbung Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Singapore Mercantile Exchange
- Kohat Cement Company Ltd. - Pakistan
- Marubeni Corporation - India
- Ambuja Cements Ltd - India
- Wilmar Investment Holdings
- LBH Netherlands Bv - Netherlands
- Ceylon Electricity Board - Sri Lanka
- Malabar Cements Ltd - India
- Videocon Industries ltd - India
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- Heidelberg Cement - Germany
- Bhoruka Overseas - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Dalmia Cement Bharat India
- Kumho Petrochemical, South Korea
- Madhucon Powers Ltd - India
- Mjunction Services Limited - India
- Indo Tambangraya Megah - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Thiess Contractors Indonesia
- Ministry of Finance - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Riau Bara Harum - Indonesia
- Vizag Seaport Private Limited - India
- Thai Mozambique Logistica
- Krishnapatnam Port Company Ltd. - India
- Renaissance Capital - South Africa
- Parry Sugars Refinery, India
- Cement Manufacturers Association - India
- Romanian Commodities Exchange
|
| |
| |
|
