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.
|
|
Monday, 04 November 19
PANAMAX: WEAKER SENTIMENTS CONTINUED FROM LAST WEEK, WITH RATES FURTHER SOFTENING IN BOTH BASINS - BALTIC BRIEFING
Capesize
The Capesize market meandered slightly upwards this week before giving back much of its gains mid-week. Opening the week at $24,945, t ...
Thursday, 31 October 19
U.S. COAL-FIRED POWER PLANTS SCHEDULED TO SHUT - REUTERS
U.S. power companies expect to retire or convert from coal to gas over 13,800 megawatts (MW) of coal-fired plants in 2019 after shutting over 13,30 ...
Thursday, 31 October 19
SE ASIA MAY BECOME NET FOSSIL FUEL IMPORTER IN COMING YEARS - IEA
Southeast Asia is set to become a key driver of world energy trends over the next 20 years as its energy demand grows at twice the global average, ...
Monday, 28 October 19
ULTRAMAX: ASIA RATES REMAINED UNDER PRESSURE WITH THE NORTH LACKING FRESH ENQUIRY - BALTIC BRIEFING
Capesize
The end of the week brought about a small increase in sentiment heading into a long weekend for some regions. After sustaining a drop ...
Thursday, 24 October 19
AUSTRALIA'S HOPES TO EXPAND COAL EXPORTS IN SOUTH-EAST ASIA 'DELUSIONAL', EXPERTS SAY - THE GUARDIAN
The number of new coal-fired power plants starting construction across south-east Asia has fallen markedly over the past two years as Australia has ...
|
|
|
Showing 1296 to 1300 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Malabar Cements Ltd - India
- Straits Asia Resources Limited - Singapore
- Salva Resources Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Chamber of Mines of South Africa
- Karaikal Port Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- AsiaOL BioFuels Corp., Philippines
- Kalimantan Lumbung Energi - Indonesia
- GVK Power & Infra Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Price Waterhouse Coopers - Russia
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- Sojitz Corporation - Japan
- Jaiprakash Power Ventures ltd
- Mjunction Services Limited - India
- Bangladesh Power Developement Board
- Antam Resourcindo - Indonesia
- Barasentosa Lestari - Indonesia
- Ministry of Transport, Egypt
- Essar Steel Hazira Ltd - India
- Bhatia International Limited - India
- Siam City Cement PLC, Thailand
- GN Power Mariveles Coal Plant, Philippines
- Deloitte Consulting - India
- Semirara Mining and Power Corporation, Philippines
- Petron Corporation, Philippines
- Agrawal Coal Company - India
- Kobexindo Tractors - Indoneisa
- Timah Investasi Mineral - Indoneisa
- Thai Mozambique Logistica
- Port Waratah Coal Services - Australia
- Borneo Indobara - Indonesia
- Commonwealth Bank - Australia
- Tamil Nadu electricity Board
- Jorong Barutama Greston.PT - Indonesia
- Coal and Oil Company - UAE
- LBH Netherlands Bv - Netherlands
- Gujarat Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Economic Council, Georgia
- Bukit Asam (Persero) Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- Australian Commodity Traders Exchange
- Vijayanagar Sugar Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Rio Tinto Coal - Australia
- Indian Oil Corporation Limited
- Binh Thuan Hamico - Vietnam
- Eastern Energy - Thailand
- European Bulk Services B.V. - Netherlands
- SMC Global Power, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate Of Revenue Intelligence - India
- Trasteel International SA, Italy
- Renaissance Capital - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- TeaM Sual Corporation - Philippines
- London Commodity Brokers - England
- Chettinad Cement Corporation Ltd - India
- IEA Clean Coal Centre - UK
- Asmin Koalindo Tuhup - Indonesia
- Kepco SPC Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Parry Sugars Refinery, India
- Therma Luzon, Inc, Philippines
- Parliament of New Zealand
- Planning Commission, India
- Sree Jayajothi Cements Limited - India
- Bayan Resources Tbk. - Indonesia
- Independent Power Producers Association of India
- Cement Manufacturers Association - India
- New Zealand Coal & Carbon
- Sical Logistics Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Petrochimia International Co. Ltd.- Taiwan
- GMR Energy Limited - India
- Indogreen Group - Indonesia
- Banpu Public Company Limited - Thailand
- PowerSource Philippines DevCo
- Maharashtra Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Ministry of Mines - Canada
- Electricity Generating Authority of Thailand
- Romanian Commodities Exchange
- Eastern Coal Council - USA
- CIMB Investment Bank - Malaysia
- Aditya Birla Group - India
- SN Aboitiz Power Inc, Philippines
- South Luzon Thermal Energy Corporation
- Star Paper Mills Limited - India
- Miang Besar Coal Terminal - Indonesia
- Tata Chemicals Ltd - India
- Orica Australia Pty. Ltd.
- Anglo American - United Kingdom
- Singapore Mercantile Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Xindia Steels Limited - India
- Orica Mining Services - Indonesia
- Metalloyd Limited - United Kingdom
- Karbindo Abesyapradhi - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Krishnapatnam Port Company Ltd. - India
- CNBM International Corporation - China
- Australian Coal Association
- Kaltim Prima Coal - Indonesia
- Wood Mackenzie - Singapore
- Kartika Selabumi Mining - Indonesia
- Sindya Power Generating Company Private Ltd
- VISA Power Limited - India
- Thiess Contractors Indonesia
- Bulk Trading Sa - Switzerland
- Globalindo Alam Lestari - Indonesia
- Makarim & Taira - Indonesia
- Uttam Galva Steels Limited - India
- Latin American Coal - Colombia
- Jindal Steel & Power Ltd - India
- Medco Energi Mining Internasional
- Marubeni Corporation - India
- Lanco Infratech Ltd - India
- Ambuja Cements Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Maheswari Brothers Coal Limited - India
- Merrill Lynch Commodities Europe
- Ceylon Electricity Board - Sri Lanka
- Posco Energy - South Korea
- Videocon Industries ltd - India
- Bukit Baiduri Energy - Indonesia
- Bhushan Steel Limited - India
- Georgia Ports Authority, United States
- Sarangani Energy Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- McConnell Dowell - Australia
- Manunggal Multi Energi - Indonesia
- Grasim Industreis Ltd - India
- Africa Commodities Group - South Africa
- Mintek Dendrill Indonesia
- Wilmar Investment Holdings
- Bukit Makmur.PT - Indonesia
- Energy Link Ltd, New Zealand
- ICICI Bank Limited - India
- MS Steel International - UAE
- Ind-Barath Power Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Standard Chartered Bank - UAE
- Holcim Trading Pte Ltd - Singapore
- Madhucon Powers Ltd - India
- Pendopo Energi Batubara - Indonesia
- Meenaskhi Energy Private Limited - India
- Indika Energy - Indonesia
- Heidelberg Cement - Germany
- India Bulls Power Limited - India
- Kideco Jaya Agung - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ministry of Finance - Indonesia
- The University of Queensland
- Coastal Gujarat Power Limited - India
- Simpson Spence & Young - Indonesia
- International Coal Ventures Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Electricity Authority, New Zealand
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Gujarat Mineral Development Corp Ltd - India
- ASAPP Information Group - India
- Attock Cement Pakistan Limited
- Minerals Council of Australia
- Directorate General of MIneral and Coal - Indonesia
- Baramulti Group, Indonesia
- Sakthi Sugars Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bharathi Cement Corporation - India
- Global Green Power PLC Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Intertek Mineral Services - Indonesia
- Goldman Sachs - Singapore
- Carbofer General Trading SA - India
- Coalindo Energy - Indonesia
- Vizag Seaport Private Limited - India
- Vedanta Resources Plc - India
- Dalmia Cement Bharat India
- San Jose City I Power Corp, Philippines
- Indian Energy Exchange, India
- Oldendorff Carriers - Singapore
- PTC India Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Mercuria Energy - Indonesia
- The State Trading Corporation of India Ltd
- Sinarmas Energy and Mining - Indonesia
- Interocean Group of Companies - India
- PNOC Exploration Corporation - Philippines
- Altura Mining Limited, Indonesia
- Samtan Co., Ltd - South Korea
- Edison Trading Spa - Italy
- SMG Consultants - Indonesia
- Formosa Plastics Group - Taiwan
- Global Business Power Corporation, Philippines
- Mercator Lines Limited - India
- Energy Development Corp, Philippines
- Central Electricity Authority - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Coal Blending Company Limited - Australia
- Indo Tambangraya Megah - Indonesia
- IHS Mccloskey Coal Group - USA
- Kumho Petrochemical, South Korea
- Leighton Contractors Pty Ltd - Australia
- Larsen & Toubro Limited - India
- Bhoruka Overseas - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Power Finance Corporation Ltd., India
- Siam City Cement - Thailand
- Central Java Power - Indonesia
|
| |
| |
|
