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 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Holcim Trading Pte Ltd - Singapore
- Global Business Power Corporation, Philippines
- Independent Power Producers Association of India
- Iligan Light & Power Inc, Philippines
- Agrawal Coal Company - India
- Indian Oil Corporation Limited
- Karaikal Port Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Kalimantan Lumbung Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Baramulti Group, Indonesia
- Kapuas Tunggal Persada - Indonesia
- The State Trading Corporation of India Ltd
- Attock Cement Pakistan Limited
- Riau Bara Harum - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Mintek Dendrill Indonesia
- Anglo American - United Kingdom
- Indian Energy Exchange, India
- Central Java Power - Indonesia
- Indo Tambangraya Megah - Indonesia
- Makarim & Taira - Indonesia
- Energy Link Ltd, New Zealand
- Semirara Mining Corp, Philippines
- Aditya Birla Group - India
- Bhatia International Limited - India
- Latin American Coal - Colombia
- Binh Thuan Hamico - Vietnam
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Siam City Cement PLC, Thailand
- Alfred C Toepfer International GmbH - Germany
- Directorate Of Revenue Intelligence - India
- Oldendorff Carriers - Singapore
- VISA Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Wilmar Investment Holdings
- Petrochimia International Co. Ltd.- Taiwan
- Jaiprakash Power Ventures ltd
- Uttam Galva Steels Limited - India
- Meralco Power Generation, Philippines
- White Energy Company Limited
- Kideco Jaya Agung - Indonesia
- Romanian Commodities Exchange
- Energy Development Corp, Philippines
- Australian Commodity Traders Exchange
- Billiton Holdings Pty Ltd - Australia
- Coal and Oil Company - UAE
- Sakthi Sugars Limited - India
- Renaissance Capital - South Africa
- Carbofer General Trading SA - India
- Malabar Cements Ltd - India
- Ambuja Cements Ltd - India
- Grasim Industreis Ltd - India
- Jindal Steel & Power Ltd - India
- Electricity Generating Authority of Thailand
- Bayan Resources Tbk. - Indonesia
- Simpson Spence & Young - Indonesia
- Eastern Coal Council - USA
- Africa Commodities Group - South Africa
- Australian Coal Association
- Borneo Indobara - Indonesia
- ICICI Bank Limited - India
- Commonwealth Bank - Australia
- CIMB Investment Bank - Malaysia
- Star Paper Mills Limited - India
- Kumho Petrochemical, South Korea
- PetroVietnam Power Coal Import and Supply Company
- Mercator Lines Limited - India
- Chamber of Mines of South Africa
- Maharashtra Electricity Regulatory Commission - India
- Gujarat Sidhee Cement - India
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Heidelberg Cement - Germany
- Krishnapatnam Port Company Ltd. - India
- Miang Besar Coal Terminal - Indonesia
- Indika Energy - Indonesia
- Marubeni Corporation - India
- Globalindo Alam Lestari - Indonesia
- Siam City Cement - Thailand
- Kepco SPC Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Interocean Group of Companies - India
- Bharathi Cement Corporation - India
- India Bulls Power Limited - India
- Bulk Trading Sa - Switzerland
- IHS Mccloskey Coal Group - USA
- SN Aboitiz Power Inc, Philippines
- Planning Commission, India
- European Bulk Services B.V. - Netherlands
- Kaltim Prima Coal - Indonesia
- Price Waterhouse Coopers - Russia
- Bhoruka Overseas - Indonesia
- Aboitiz Power Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Central Electricity Authority - India
- Maheswari Brothers Coal Limited - India
- Sindya Power Generating Company Private Ltd
- GMR Energy Limited - India
- Sarangani Energy Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Kartika Selabumi Mining - Indonesia
- Sical Logistics Limited - India
- Larsen & Toubro Limited - India
- OPG Power Generation Pvt Ltd - India
- CNBM International Corporation - China
- Eastern Energy - Thailand
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- Pendopo Energi Batubara - Indonesia
- Samtan Co., Ltd - South Korea
- Port Waratah Coal Services - Australia
- Gujarat Electricity Regulatory Commission - India
- Toyota Tsusho Corporation, Japan
- IEA Clean Coal Centre - UK
- Jorong Barutama Greston.PT - Indonesia
- ASAPP Information Group - India
- Orica Mining Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- SMC Global Power, Philippines
- The University of Queensland
- Global Coal Blending Company Limited - Australia
- Goldman Sachs - Singapore
- Barasentosa Lestari - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Finance - Indonesia
- Sree Jayajothi Cements Limited - India
- LBH Netherlands Bv - Netherlands
- Rashtriya Ispat Nigam Limited - India
- Timah Investasi Mineral - Indoneisa
- Lanco Infratech Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Parry Sugars Refinery, India
- Videocon Industries ltd - India
- Ministry of Transport, Egypt
- Power Finance Corporation Ltd., India
- Formosa Plastics Group - Taiwan
- Edison Trading Spa - Italy
- The Treasury - Australian Government
- Dalmia Cement Bharat India
- Thai Mozambique Logistica
- Vedanta Resources Plc - India
- Pipit Mutiara Jaya. PT, Indonesia
- Meenaskhi Energy Private Limited - India
- Trasteel International SA, Italy
- PTC India Limited - India
- Bangladesh Power Developement Board
- International Coal Ventures Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- PNOC Exploration Corporation - Philippines
- Wood Mackenzie - Singapore
- Rio Tinto Coal - Australia
- Directorate General of MIneral and Coal - Indonesia
- Essar Steel Hazira Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sojitz Corporation - Japan
- Ind-Barath Power Infra Limited - India
- PowerSource Philippines DevCo
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Mines - Canada
- Posco Energy - South Korea
- Minerals Council of Australia
- Savvy Resources Ltd - HongKong
- Altura Mining Limited, Indonesia
- Thiess Contractors Indonesia
- Electricity Authority, New Zealand
- Madhucon Powers Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Xindia Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Tata Chemicals Ltd - India
- Parliament of New Zealand
- South Luzon Thermal Energy Corporation
- Georgia Ports Authority, United States
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Cigading International Bulk Terminal - Indonesia
- Bhushan Steel Limited - India
- MS Steel International - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Therma Luzon, Inc, Philippines
- Singapore Mercantile Exchange
- Indonesian Coal Mining Association
- Economic Council, Georgia
- Merrill Lynch Commodities Europe
- Coalindo Energy - Indonesia
- Deloitte Consulting - India
- Manunggal Multi Energi - Indonesia
- GVK Power & Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Banpu Public Company Limited - Thailand
- Mjunction Services Limited - India
- Bukit Makmur.PT - Indonesia
- Medco Energi Mining Internasional
- Standard Chartered Bank - UAE
- SMG Consultants - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bahari Cakrawala Sebuku - Indonesia
- Chettinad Cement Corporation Ltd - India
- San Jose City I Power Corp, Philippines
- Orica Australia Pty. Ltd.
- Indogreen Group - Indonesia
- London Commodity Brokers - England
- Bukit Baiduri Energy - Indonesia
- Mercuria Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- McConnell Dowell - Australia
- Cement Manufacturers Association - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coastal Gujarat Power Limited - India
|
| |
| |
|
