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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
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Sunday, 29 December 19
AUSTRALIA SUFFERS WORST OF CHINA'S COAL CURBS AFTER EARLIER BOOM - BLOOMBERG
Australia is bearing the brunt of China’s year-end coal import restrictions, ceding market share to other exporters including Russia and Mong ...
Saturday, 28 December 19
SUPRAMAX: A 63,000DWT VESSEL, OPEN CIGADING, FIXED A TRIP VIA INDONESIA, REDELIVERY WEST COAST INDIA, AT $8,500 - BALTIC BRIEFING
Capesize
The Capesize market this past week has been attempting to recalibrate itself in consideration of weakening freight levels and increasing ...
Saturday, 28 December 19
CHINESE INDUSTRIAL CITY TO FURTHER CUT COAL CONSUMPTION - XINHUA
Harbin, capital city of Heilongjiang Province in China’s northeastern industrial heartland, is planning to further reduce its coal consumptio ...
Friday, 27 December 19
MISERY LOOMS OVER TOP COAL SHIPPERS AS CHINA TO BUY LESS IN 2020 BLOOMBERG
China isn’t cutting back on consumption of the most-polluting fossil fuel just yet, but it is set to reduce imports.
The world ...
Thursday, 26 December 19
REVIEW OF 2019 AND OUTLOOK FOR 2020 - OPEC
Global economic growth slowed in 2019, impacted by a variety of challenges. Trade issues not only led to reduction in global final consumption but ...
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Showing 1221 to 1225 news of total 6871 |
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- Makarim & Taira - Indonesia
- Sree Jayajothi Cements Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Metalloyd Limited - United Kingdom
- Binh Thuan Hamico - Vietnam
- Samtan Co., Ltd - South Korea
- Bulk Trading Sa - Switzerland
- Carbofer General Trading SA - India
- Bukit Baiduri Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Energy Development Corp, Philippines
- CNBM International Corporation - China
- Vedanta Resources Plc - India
- Edison Trading Spa - Italy
- The State Trading Corporation of India Ltd
- Oldendorff Carriers - Singapore
- Altura Mining Limited, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Latin American Coal - Colombia
- White Energy Company Limited
- PowerSource Philippines DevCo
- Sarangani Energy Corporation, Philippines
- Barasentosa Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Bukit Makmur.PT - Indonesia
- Wilmar Investment Holdings
- The University of Queensland
- India Bulls Power Limited - India
- Formosa Plastics Group - Taiwan
- Parry Sugars Refinery, India
- Intertek Mineral Services - Indonesia
- Africa Commodities Group - South Africa
- Larsen & Toubro Limited - India
- Semirara Mining and Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Dalmia Cement Bharat India
- Sakthi Sugars Limited - India
- Eastern Energy - Thailand
- Xindia Steels Limited - India
- Price Waterhouse Coopers - Russia
- IHS Mccloskey Coal Group - USA
- ICICI Bank Limited - India
- Bhoruka Overseas - Indonesia
- Posco Energy - South Korea
- Gujarat Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- International Coal Ventures Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Renaissance Capital - South Africa
- Independent Power Producers Association of India
- Neyveli Lignite Corporation Ltd, - India
- Coastal Gujarat Power Limited - India
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- San Jose City I Power Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Uttam Galva Steels Limited - India
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- Merrill Lynch Commodities Europe
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ceylon Electricity Board - Sri Lanka
- Mercuria Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Medco Energi Mining Internasional
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- LBH Netherlands Bv - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- Central Java Power - Indonesia
- Maheswari Brothers Coal Limited - India
- Ind-Barath Power Infra Limited - India
- Billiton Holdings Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- IEA Clean Coal Centre - UK
- Ministry of Finance - Indonesia
- Bangladesh Power Developement Board
- Aditya Birla Group - India
- PNOC Exploration Corporation - Philippines
- Tata Chemicals Ltd - India
- Pendopo Energi Batubara - Indonesia
- Essar Steel Hazira Ltd - India
- Kartika Selabumi Mining - Indonesia
- Karaikal Port Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Thai Mozambique Logistica
- Kapuas Tunggal Persada - Indonesia
- Toyota Tsusho Corporation, Japan
- Kepco SPC Power Corporation, Philippines
- Agrawal Coal Company - India
- Electricity Authority, New Zealand
- Deloitte Consulting - India
- Semirara Mining Corp, Philippines
- Salva Resources Pvt Ltd - India
- Lanco Infratech Ltd - India
- Sojitz Corporation - Japan
- Bayan Resources Tbk. - Indonesia
- Grasim Industreis Ltd - India
- Kumho Petrochemical, South Korea
- Romanian Commodities Exchange
- Star Paper Mills Limited - India
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- Miang Besar Coal Terminal - Indonesia
- New Zealand Coal & Carbon
- OPG Power Generation Pvt Ltd - India
- Goldman Sachs - Singapore
- Trasteel International SA, Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- SMG Consultants - Indonesia
- Minerals Council of Australia
- Kideco Jaya Agung - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bhushan Steel Limited - India
- London Commodity Brokers - England
- Bank of Tokyo Mitsubishi UFJ Ltd
- Attock Cement Pakistan Limited
- Alfred C Toepfer International GmbH - Germany
- GVK Power & Infra Limited - India
- Eastern Coal Council - USA
- Savvy Resources Ltd - HongKong
- PetroVietnam Power Coal Import and Supply Company
- Parliament of New Zealand
- Therma Luzon, Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Meenaskhi Energy Private Limited - India
- Madhucon Powers Ltd - India
- Coal and Oil Company - UAE
- Videocon Industries ltd - India
- Rashtriya Ispat Nigam Limited - India
- Power Finance Corporation Ltd., India
- Kohat Cement Company Ltd. - Pakistan
- CIMB Investment Bank - Malaysia
- Singapore Mercantile Exchange
- GMR Energy Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement - Thailand
- Indian Oil Corporation Limited
- Jindal Steel & Power Ltd - India
- Timah Investasi Mineral - Indoneisa
- Sical Logistics Limited - India
- Cement Manufacturers Association - India
- Indian Energy Exchange, India
- Gujarat Sidhee Cement - India
- Coalindo Energy - Indonesia
- Ambuja Cements Ltd - India
- Central Electricity Authority - India
- Mjunction Services Limited - India
- Wood Mackenzie - Singapore
- Indogreen Group - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- VISA Power Limited - India
- Electricity Generating Authority of Thailand
- Indika Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- SMC Global Power, Philippines
- Jaiprakash Power Ventures ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Borneo Indobara - Indonesia
- Commonwealth Bank - Australia
- Standard Chartered Bank - UAE
- Kobexindo Tractors - Indoneisa
- Directorate Of Revenue Intelligence - India
- Indonesian Coal Mining Association
- Interocean Group of Companies - India
- Jorong Barutama Greston.PT - Indonesia
- Vizag Seaport Private Limited - India
- TeaM Sual Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Marubeni Corporation - India
- ASAPP Information Group - India
- Mintek Dendrill Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Global Business Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Economic Council, Georgia
- Kaltim Prima Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Ministry of Mines - Canada
- AsiaOL BioFuels Corp., Philippines
- Energy Link Ltd, New Zealand
- Planning Commission, India
- MS Steel International - UAE
- Iligan Light & Power Inc, Philippines
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- Siam City Cement PLC, Thailand
- PTC India Limited - India
- Heidelberg Cement - Germany
- Straits Asia Resources Limited - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Australian Coal Association
- Global Green Power PLC Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Antam Resourcindo - Indonesia
- GAC Shipping (India) Pvt Ltd
- Georgia Ports Authority, United States
- Banpu Public Company Limited - Thailand
- Baramulti Group, Indonesia
- Orica Australia Pty. Ltd.
- South Luzon Thermal Energy Corporation
- Chamber of Mines of South Africa
- Bharathi Cement Corporation - India
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- Petron Corporation, Philippines
- Mercator Lines Limited - India
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