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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, 26 May 19
SUPRAMAX: A LIMITED ACTIVITY WAS REPORTED, WITH THE UPCOMING INDONESIAN HOLIDAYS SLOWING COAL MOVEMENTS - BALTIC BRIEFING
Capesize
The past week marked one of the busier periods for Capesizes this year. With a subdued start due to a public holiday in Singapore on M ...
Wednesday, 22 May 19
SHIPPING MARKET INSIGHT - INTERMODAL
The ship repair sector is showing a constant and gradual increase on the workload throughout the past months, with almost all the shipyards worldwi ...
Saturday, 18 May 19
SUPRAMAX: 56,000DWT OPEN PANJANG FIXING AT $10,500 FOR A TRIP VIA INDONESIA, AND REDELIVERY CHINA - BALTIC EXCHANGE
Capesize
The market continues to ebb and flow with a generally positive up trend. The Capesize 5TC opened with upward momentum from last week&r ...
Friday, 17 May 19
CHINA'S BENCHMARK POWER COAL PRICE REMAINS FLAT - XINHUA
China’s benchmark power coal price remained flat during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of ...
Thursday, 16 May 19
SUPRAMAX: INDO/CHINA COAL RV TRADING AROUND US$ 9,000 BSS S.CHINA DELIVERY - FEARNLEYS
Capesize
This volatile segment is trying to find a clear direction from the present US$ 12,000/day earnings for standard units says Fearnleys W ...
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Showing 1396 to 1400 news of total 6871 |
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- Siam City Cement PLC, Thailand
- Anglo American - United Kingdom
- Samtan Co., Ltd - South Korea
- Metalloyd Limited - United Kingdom
- Toyota Tsusho Corporation, Japan
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- Star Paper Mills Limited - India
- CNBM International Corporation - China
- Economic Council, Georgia
- SMG Consultants - Indonesia
- Indian Oil Corporation Limited
- Savvy Resources Ltd - HongKong
- Eastern Energy - Thailand
- Vedanta Resources Plc - India
- Central Java Power - Indonesia
- Kepco SPC Power Corporation, Philippines
- Chamber of Mines of South Africa
- Miang Besar Coal Terminal - Indonesia
- Dalmia Cement Bharat India
- Global Green Power PLC Corporation, Philippines
- Gujarat Sidhee Cement - India
- Globalindo Alam Lestari - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Binh Thuan Hamico - Vietnam
- New Zealand Coal & Carbon
- Kalimantan Lumbung Energi - Indonesia
- Tata Chemicals Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Malabar Cements Ltd - India
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- Bangladesh Power Developement Board
- Orica Mining Services - Indonesia
- Iligan Light & Power Inc, Philippines
- Carbofer General Trading SA - India
- The University of Queensland
- Petrochimia International Co. Ltd.- Taiwan
- Coastal Gujarat Power Limited - India
- GMR Energy Limited - India
- Altura Mining Limited, Indonesia
- Kapuas Tunggal Persada - Indonesia
- LBH Netherlands Bv - Netherlands
- VISA Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- GVK Power & Infra Limited - India
- Essar Steel Hazira Ltd - India
- Energy Development Corp, Philippines
- Mjunction Services Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Parry Sugars Refinery, India
- Barasentosa Lestari - Indonesia
- Bhatia International Limited - India
- Central Electricity Authority - India
- Sindya Power Generating Company Private Ltd
- PNOC Exploration Corporation - Philippines
- Wood Mackenzie - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sojitz Corporation - Japan
- Makarim & Taira - Indonesia
- McConnell Dowell - Australia
- Petron Corporation, Philippines
- Cement Manufacturers Association - India
- Neyveli Lignite Corporation Ltd, - India
- Krishnapatnam Port Company Ltd. - India
- Kaltim Prima Coal - Indonesia
- Goldman Sachs - Singapore
- Indika Energy - Indonesia
- Ministry of Transport, Egypt
- SN Aboitiz Power Inc, Philippines
- Romanian Commodities Exchange
- Intertek Mineral Services - Indonesia
- Standard Chartered Bank - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kartika Selabumi Mining - Indonesia
- Antam Resourcindo - Indonesia
- The Treasury - Australian Government
- Kohat Cement Company Ltd. - Pakistan
- Latin American Coal - Colombia
- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- Kumho Petrochemical, South Korea
- Wilmar Investment Holdings
- Therma Luzon, Inc, Philippines
- Jindal Steel & Power Ltd - India
- India Bulls Power Limited - India
- Mercuria Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Manunggal Multi Energi - Indonesia
- Trasteel International SA, Italy
- Directorate General of MIneral and Coal - Indonesia
- Indian Energy Exchange, India
- Bhoruka Overseas - Indonesia
- Lanco Infratech Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Videocon Industries ltd - India
- Oldendorff Carriers - Singapore
- Attock Cement Pakistan Limited
- Karbindo Abesyapradhi - Indoneisa
- Global Coal Blending Company Limited - Australia
- IEA Clean Coal Centre - UK
- London Commodity Brokers - England
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ceylon Electricity Board - Sri Lanka
- PetroVietnam Power Coal Import and Supply Company
- Kobexindo Tractors - Indoneisa
- Agrawal Coal Company - India
- Bhushan Steel Limited - India
- Edison Trading Spa - Italy
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PTC India Limited - India
- Parliament of New Zealand
- Power Finance Corporation Ltd., India
- Georgia Ports Authority, United States
- Meenaskhi Energy Private Limited - India
- Pendopo Energi Batubara - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Mintek Dendrill Indonesia
- Global Business Power Corporation, Philippines
- ASAPP Information Group - India
- Medco Energi Mining Internasional
- Gujarat Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Simpson Spence & Young - Indonesia
- Kideco Jaya Agung - Indonesia
- Aditya Birla Group - India
- Ambuja Cements Ltd - India
- Deloitte Consulting - India
- Coalindo Energy - Indonesia
- Energy Link Ltd, New Zealand
- Meralco Power Generation, Philippines
- Vizag Seaport Private Limited - India
- The State Trading Corporation of India Ltd
- Borneo Indobara - Indonesia
- Minerals Council of Australia
- Xindia Steels Limited - India
- Alfred C Toepfer International GmbH - Germany
- Formosa Plastics Group - Taiwan
- Commonwealth Bank - Australia
- Sinarmas Energy and Mining - Indonesia
- Africa Commodities Group - South Africa
- Renaissance Capital - South Africa
- Sakthi Sugars Limited - India
- OPG Power Generation Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Indogreen Group - Indonesia
- Merrill Lynch Commodities Europe
- Australian Commodity Traders Exchange
- Singapore Mercantile Exchange
- Sarangani Energy Corporation, Philippines
- Baramulti Group, Indonesia
- Sree Jayajothi Cements Limited - India
- Bayan Resources Tbk. - Indonesia
- Electricity Generating Authority of Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Billiton Holdings Pty Ltd - Australia
- White Energy Company Limited
- Independent Power Producers Association of India
- Jorong Barutama Greston.PT - Indonesia
- Thai Mozambique Logistica
- Semirara Mining Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Port Waratah Coal Services - Australia
- Tamil Nadu electricity Board
- ICICI Bank Limited - India
- Riau Bara Harum - Indonesia
- MS Steel International - UAE
- Thiess Contractors Indonesia
- Marubeni Corporation - India
- Maheswari Brothers Coal Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Rio Tinto Coal - Australia
- Holcim Trading Pte Ltd - Singapore
- South Luzon Thermal Energy Corporation
- Posco Energy - South Korea
- Siam City Cement - Thailand
- Gujarat Mineral Development Corp Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Interocean Group of Companies - India
- GAC Shipping (India) Pvt Ltd
- International Coal Ventures Pvt Ltd - India
- Madhucon Powers Ltd - India
- Ministry of Finance - Indonesia
- TeaM Sual Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Banpu Public Company Limited - Thailand
- Mercator Lines Limited - India
- CIMB Investment Bank - Malaysia
- AsiaOL BioFuels Corp., Philippines
- PowerSource Philippines DevCo
- Heidelberg Cement - Germany
- Directorate Of Revenue Intelligence - India
- Ind-Barath Power Infra Limited - India
- Electricity Authority, New Zealand
- Timah Investasi Mineral - Indoneisa
- Planning Commission, India
- Eastern Coal Council - USA
- Rashtriya Ispat Nigam Limited - India
- San Jose City I Power Corp, Philippines
- Orica Australia Pty. Ltd.
- Larsen & Toubro Limited - India
- Straits Asia Resources Limited - Singapore
- Aboitiz Power Corporation - Philippines
- Uttam Galva Steels Limited - India
- Australian Coal Association
- Bharathi Cement Corporation - India
- Bukit Baiduri Energy - Indonesia
- Coal and Oil Company - UAE
- IHS Mccloskey Coal Group - USA
- Grasim Industreis Ltd - India
- Price Waterhouse Coopers - Russia
- SMC Global Power, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Semirara Mining and Power Corporation, Philippines
- Sical Logistics Limited - India
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