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, 06 August 19
SHIPPING MARKET INSIGHT - INTERMODAL
On the 12th of May four tankers were attacked near the coast of Fujairah. The tankers hit were waiving international flags such as that of No ...
Monday, 05 August 19
SUPRAMAX: COAL FROM INDONESIA TO CHINA PAID AT MID $8,000S ON A 57,000-TONNER DELIVERY SOUTH CHINA - BALTIC BRIEFING
Capesize
Having hit a high of $32,963 early last week, the Capesize 5TC now stands at $25,749. This is over 20% of its value lost in 10 days. C ...
Thursday, 01 August 19
PANAMAX: THE SENTIMENT IN THE MARKET IS STILL POSITIVE FOR THE LONGER TERM - FEARNLEYS
Capesize
Two weeks ago the 5TC index was at 33,000 USD pd. Since then it has fallen off a bit and has stayed around 27,000 USD pd the last week ...
Thursday, 01 August 19
INDIKA ENERGY REVENUES DECLINE DUE TO LOW COAL PRICES
One of the largest Indonesian integrated energy companies PT Indika Energy Tbk posted revenues of US $ 1,380.4 million, down 4.6% compared to US $ ...
Wednesday, 31 July 19
INDIA'S 2019 THERMAL COAL IMPORTS SEEN AT 180-185 MLN T - WOODMAC
India is expected to import 180-185 million tonnes of thermal coal in 2019, said Dale Hazelton, head of thermal coal at consultancy Wood Mackenzie. ...
|
|
|
Showing 1351 to 1355 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Indogreen Group - Indonesia
- Carbofer General Trading SA - India
- Manunggal Multi Energi - Indonesia
- Goldman Sachs - Singapore
- Larsen & Toubro Limited - India
- White Energy Company Limited
- Bulk Trading Sa - Switzerland
- Maharashtra Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- PetroVietnam Power Coal Import and Supply Company
- Central Java Power - Indonesia
- Kepco SPC Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Gujarat Sidhee Cement - India
- IEA Clean Coal Centre - UK
- Power Finance Corporation Ltd., India
- Baramulti Group, Indonesia
- Kumho Petrochemical, South Korea
- Ministry of Transport, Egypt
- PowerSource Philippines DevCo
- Indonesian Coal Mining Association
- Lanco Infratech Ltd - India
- Karaikal Port Pvt Ltd - India
- Wilmar Investment Holdings
- Salva Resources Pvt Ltd - India
- SMG Consultants - Indonesia
- GAC Shipping (India) Pvt Ltd
- Minerals Council of Australia
- Ambuja Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Orica Australia Pty. Ltd.
- New Zealand Coal & Carbon
- Indo Tambangraya Megah - Indonesia
- Central Electricity Authority - India
- Attock Cement Pakistan Limited
- GN Power Mariveles Coal Plant, Philippines
- Georgia Ports Authority, United States
- Australian Commodity Traders Exchange
- Kobexindo Tractors - Indoneisa
- Meralco Power Generation, Philippines
- Indian Energy Exchange, India
- Grasim Industreis Ltd - India
- Savvy Resources Ltd - HongKong
- Asmin Koalindo Tuhup - Indonesia
- The University of Queensland
- Commonwealth Bank - Australia
- Electricity Generating Authority of Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Sical Logistics Limited - India
- Samtan Co., Ltd - South Korea
- Malabar Cements Ltd - India
- CNBM International Corporation - China
- Antam Resourcindo - Indonesia
- European Bulk Services B.V. - Netherlands
- Romanian Commodities Exchange
- Therma Luzon, Inc, Philippines
- Metalloyd Limited - United Kingdom
- McConnell Dowell - Australia
- Ministry of Mines - Canada
- Coalindo Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Toyota Tsusho Corporation, Japan
- Anglo American - United Kingdom
- Sakthi Sugars Limited - India
- Bangladesh Power Developement Board
- Bhushan Steel Limited - India
- Leighton Contractors Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Heidelberg Cement - Germany
- Kideco Jaya Agung - Indonesia
- OPG Power Generation Pvt Ltd - India
- Ministry of Finance - Indonesia
- Tamil Nadu electricity Board
- South Luzon Thermal Energy Corporation
- Semirara Mining Corp, Philippines
- Renaissance Capital - South Africa
- Globalindo Alam Lestari - Indonesia
- Uttam Galva Steels Limited - India
- Petron Corporation, Philippines
- Indika Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- India Bulls Power Limited - India
- San Jose City I Power Corp, Philippines
- Merrill Lynch Commodities Europe
- Orica Mining Services - Indonesia
- MS Steel International - UAE
- Bukit Baiduri Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement PLC, Thailand
- Borneo Indobara - Indonesia
- Vedanta Resources Plc - India
- Kartika Selabumi Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- PTC India Limited - India
- Global Business Power Corporation, Philippines
- Agrawal Coal Company - India
- GVK Power & Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Formosa Plastics Group - Taiwan
- Rashtriya Ispat Nigam Limited - India
- Krishnapatnam Port Company Ltd. - India
- SMC Global Power, Philippines
- Parliament of New Zealand
- CIMB Investment Bank - Malaysia
- Bhoruka Overseas - Indonesia
- Sindya Power Generating Company Private Ltd
- Jaiprakash Power Ventures ltd
- Mercuria Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- VISA Power Limited - India
- Wood Mackenzie - Singapore
- Standard Chartered Bank - UAE
- Siam City Cement - Thailand
- Pendopo Energi Batubara - Indonesia
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- Global Green Power PLC Corporation, Philippines
- ICICI Bank Limited - India
- Interocean Group of Companies - India
- Simpson Spence & Young - Indonesia
- Dalmia Cement Bharat India
- Holcim Trading Pte Ltd - Singapore
- The State Trading Corporation of India Ltd
- Star Paper Mills Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Mjunction Services Limited - India
- Trasteel International SA, Italy
- Essar Steel Hazira Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- GMR Energy Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Banpu Public Company Limited - Thailand
- Coastal Gujarat Power Limited - India
- Medco Energi Mining Internasional
- Aboitiz Power Corporation - Philippines
- Tata Chemicals Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Eastern Coal Council - USA
- Iligan Light & Power Inc, Philippines
- Vizag Seaport Private Limited - India
- IHS Mccloskey Coal Group - USA
- Singapore Mercantile Exchange
- SN Aboitiz Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Mercator Lines Limited - India
- Marubeni Corporation - India
- Xindia Steels Limited - India
- Bhatia International Limited - India
- International Coal Ventures Pvt Ltd - India
- Chamber of Mines of South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sinarmas Energy and Mining - Indonesia
- Deloitte Consulting - India
- Energy Development Corp, Philippines
- Posco Energy - South Korea
- Kohat Cement Company Ltd. - Pakistan
- Kaltim Prima Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Makarim & Taira - Indonesia
- Eastern Energy - Thailand
- Billiton Holdings Pty Ltd - Australia
- Edison Trading Spa - Italy
- Bukit Makmur.PT - Indonesia
- Mintek Dendrill Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Altura Mining Limited, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- Coal and Oil Company - UAE
- Oldendorff Carriers - Singapore
- Parry Sugars Refinery, India
- Aditya Birla Group - India
- Bayan Resources Tbk. - Indonesia
- Australian Coal Association
- Ceylon Electricity Board - Sri Lanka
- Chettinad Cement Corporation Ltd - India
- London Commodity Brokers - England
- Kapuas Tunggal Persada - Indonesia
- Jindal Steel & Power Ltd - India
- Economic Council, Georgia
- Indian Oil Corporation Limited
- ASAPP Information Group - India
- Timah Investasi Mineral - Indoneisa
- LBH Netherlands Bv - Netherlands
- PNOC Exploration Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Thiess Contractors Indonesia
- Energy Link Ltd, New Zealand
- Latin American Coal - Colombia
- Madhucon Powers Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Rio Tinto Coal - Australia
- Port Waratah Coal Services - Australia
- Videocon Industries ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Cement Manufacturers Association - India
- Planning Commission, India
- Alfred C Toepfer International GmbH - Germany
- Global Coal Blending Company Limited - Australia
- TeaM Sual Corporation - Philippines
- Africa Commodities Group - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Independent Power Producers Association of India
- Sojitz Corporation - Japan
- Electricity Authority, New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- The Treasury - Australian Government
|
| |
| |
|
