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.
|
|
Wednesday, 17 April 19
LNG WESTERN AFRICA CONFERENCE 2019
The only LNG Focus Platform to Accelerate Investment and Cooperation in Western African Countries
LNG Western Africa Conference 2019 ...
Saturday, 13 April 19
IMO 2020 - DON'T SCRUB IT! - IVAR MYKLEBUST
KNOWLEDGE TO ELEVATE
Höegh Autoliners stands firm on its decision not to implement scrubbers but comply with the IMO 2020 regulations by ...
Saturday, 13 April 19
CAPESIZE: WEST AUSTRALIA TO CHINA IRON ORE CARGOES LIFTING FROM $4.60 PMT TO ABOVE $5.00 - BALTIC BRIEFING
Capesize
The market saw a steep ascent from the depths of last week. The Baltic Capesize Index (BCI) 5TC opened on Monday at $5,099, although b ...
Friday, 12 April 19
OIL MARKET REPORT: MIXED SIGNALS - IEA
The huge increase in oil production we saw in 2H18 has reversed following the implementation of the new Vienna Agreement and the increasing effecti ...
Friday, 12 April 19
OFFSHORE MENA CONGRESS 2019
Offshore MENA Congress 2019
Event Date : 11-12th Jun. 2019
Location : Cairo, Egypt
Offshore MENA Congress 2019 Offshor ...
|
|
|
Showing 1416 to 1420 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Africa Commodities Group - South Africa
- Sarangani Energy Corporation, Philippines
- Medco Energi Mining Internasional
- PetroVietnam Power Coal Import and Supply Company
- GMR Energy Limited - India
- Romanian Commodities Exchange
- PTC India Limited - India
- London Commodity Brokers - England
- Deloitte Consulting - India
- Holcim Trading Pte Ltd - Singapore
- Latin American Coal - Colombia
- Bukit Asam (Persero) Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Ministry of Mines - Canada
- Gujarat Sidhee Cement - India
- Posco Energy - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Simpson Spence & Young - Indonesia
- Parliament of New Zealand
- Singapore Mercantile Exchange
- Sree Jayajothi Cements Limited - India
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Straits Asia Resources Limited - Singapore
- Essar Steel Hazira Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Petrochimia International Co. Ltd.- Taiwan
- TeaM Sual Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Independent Power Producers Association of India
- Lanco Infratech Ltd - India
- Indogreen Group - Indonesia
- Kobexindo Tractors - Indoneisa
- Intertek Mineral Services - Indonesia
- Mintek Dendrill Indonesia
- Ministry of Finance - Indonesia
- Grasim Industreis Ltd - India
- Madhucon Powers Ltd - India
- Timah Investasi Mineral - Indoneisa
- PowerSource Philippines DevCo
- Bayan Resources Tbk. - Indonesia
- New Zealand Coal & Carbon
- India Bulls Power Limited - India
- SMG Consultants - Indonesia
- Trasteel International SA, Italy
- Iligan Light & Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Metalloyd Limited - United Kingdom
- The University of Queensland
- LBH Netherlands Bv - Netherlands
- Minerals Council of Australia
- Vijayanagar Sugar Pvt Ltd - India
- Mjunction Services Limited - India
- Semirara Mining Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Standard Chartered Bank - UAE
- Renaissance Capital - South Africa
- Power Finance Corporation Ltd., India
- Ambuja Cements Ltd - India
- Makarim & Taira - Indonesia
- Australian Commodity Traders Exchange
- Jaiprakash Power Ventures ltd
- Directorate Of Revenue Intelligence - India
- Mercuria Energy - Indonesia
- Chamber of Mines of South Africa
- Siam City Cement - Thailand
- Meralco Power Generation, Philippines
- Carbofer General Trading SA - India
- Bangladesh Power Developement Board
- Miang Besar Coal Terminal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Bukit Makmur.PT - Indonesia
- Xindia Steels Limited - India
- Savvy Resources Ltd - HongKong
- San Jose City I Power Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Bukit Baiduri Energy - Indonesia
- Cement Manufacturers Association - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining and Power Corporation, Philippines
- Sical Logistics Limited - India
- Krishnapatnam Port Company Ltd. - India
- Global Business Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Indian Oil Corporation Limited
- GVK Power & Infra Limited - India
- Borneo Indobara - Indonesia
- Energy Link Ltd, New Zealand
- Port Waratah Coal Services - Australia
- PNOC Exploration Corporation - Philippines
- Coalindo Energy - Indonesia
- Aditya Birla Group - India
- The State Trading Corporation of India Ltd
- Georgia Ports Authority, United States
- Toyota Tsusho Corporation, Japan
- Wood Mackenzie - Singapore
- Central Electricity Authority - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Parry Sugars Refinery, India
- AsiaOL BioFuels Corp., Philippines
- Marubeni Corporation - India
- Gujarat Mineral Development Corp Ltd - India
- Tamil Nadu electricity Board
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- McConnell Dowell - Australia
- Formosa Plastics Group - Taiwan
- Salva Resources Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- IEA Clean Coal Centre - UK
- Siam City Cement PLC, Thailand
- Petron Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- CIMB Investment Bank - Malaysia
- Manunggal Multi Energi - Indonesia
- Ind-Barath Power Infra Limited - India
- Eastern Coal Council - USA
- Indika Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Aboitiz Power Corporation - Philippines
- Indonesian Coal Mining Association
- European Bulk Services B.V. - Netherlands
- Altura Mining Limited, Indonesia
- Kumho Petrochemical, South Korea
- Barasentosa Lestari - Indonesia
- The Treasury - Australian Government
- Dalmia Cement Bharat India
- Sinarmas Energy and Mining - Indonesia
- Antam Resourcindo - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Agrawal Coal Company - India
- Binh Thuan Hamico - Vietnam
- Bhatia International Limited - India
- Commonwealth Bank - Australia
- Coastal Gujarat Power Limited - India
- Bulk Trading Sa - Switzerland
- Energy Development Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Coal Association
- Orica Australia Pty. Ltd.
- Vizag Seaport Private Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SN Aboitiz Power Inc, Philippines
- Malabar Cements Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Indian Energy Exchange, India
- Planning Commission, India
- Larsen & Toubro Limited - India
- ICICI Bank Limited - India
- Ceylon Electricity Board - Sri Lanka
- Ministry of Transport, Egypt
- Samtan Co., Ltd - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Tata Chemicals Ltd - India
- Karaikal Port Pvt Ltd - India
- Goldman Sachs - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Sojitz Corporation - Japan
- Thai Mozambique Logistica
- Bharathi Cement Corporation - India
- Pendopo Energi Batubara - Indonesia
- Uttam Galva Steels Limited - India
- Baramulti Group, Indonesia
- Rio Tinto Coal - Australia
- Anglo American - United Kingdom
- SMC Global Power, Philippines
- CNBM International Corporation - China
- Interocean Group of Companies - India
- Globalindo Alam Lestari - Indonesia
- Merrill Lynch Commodities Europe
- Gujarat Electricity Regulatory Commission - India
- GAC Shipping (India) Pvt Ltd
- Electricity Authority, New Zealand
- Sindya Power Generating Company Private Ltd
- Vedanta Resources Plc - India
- Kohat Cement Company Ltd. - Pakistan
- Mercator Lines Limited - India
- VISA Power Limited - India
- Attock Cement Pakistan Limited
- Price Waterhouse Coopers - Russia
- Central Java Power - Indonesia
- Videocon Industries ltd - India
- Economic Council, Georgia
- Therma Luzon, Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Heidelberg Cement - Germany
- Kapuas Tunggal Persada - Indonesia
- Wilmar Investment Holdings
- Thiess Contractors Indonesia
- Riau Bara Harum - Indonesia
- Bhushan Steel Limited - India
- South Luzon Thermal Energy Corporation
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kideco Jaya Agung - Indonesia
- ASAPP Information Group - India
- Oldendorff Carriers - Singapore
- Leighton Contractors Pty Ltd - Australia
- Eastern Energy - Thailand
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- White Energy Company Limited
- Alfred C Toepfer International GmbH - Germany
- Electricity Generating Authority of Thailand
- Bhoruka Overseas - Indonesia
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- Banpu Public Company Limited - Thailand
- MS Steel International - UAE
- Kepco SPC Power Corporation, Philippines
- Coal and Oil Company - UAE
- Maharashtra Electricity Regulatory Commission - India
|
| |
| |
|
