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Tuesday, 06 September 11
INDONESIAS PROPOSED COAL EXPORT BAN MAY HAVE IMPACT ON THE INDIAN POWER SECTOR - DIPESH DIPU
.jpg) COALspot.com - This is a special interview about Indonesian proposed coal export ban by 2014, with Mr. Dipesh Dipu, Director of Deloitte Touche Tohmatsu, India.
The Indonesian government is currently in the process of drafting a new regulation that could ban the export of low-grade coal by January 12, 2014. This is likely to apply to coal below 5700 kcal/kg on air dried basis in value.
As of now Indonesia is producing around 150 million tons of coal with calorific value below 5700 GAD (according to chairman of Indonesian coal mining association). However by 2014, there are possibilities the total production of below 5700 GAD coal may reach more than 200 million per annum.
Will Indonesian coal export ban impact on the Indian fuel requirements?
The earlier grade of coal that was being considered for proposed ban has GCV of 5100 kcal/kg of less (adb), which can be comparable to 3800-4200 kcal/kg (arb) domestic coal available in India. This grade of coal has found favor in India primarily due to likely price advantage but economics of power generation based on such grade of imported coal may be a suspect. This considering that such grades of coal from Indonesia typically have high moisture content, which makes transportation cost per unit of energy generated higher. The quantum of the low grade of coal (<5100 kcal/kg adb) procured from Indonesia is likely to remain relatively low.
However, if the new definition of low grade coal is applied (<5700 kcal/kg adb), it may be reasonable to believe that such a ban may have impact on the Indian power sector as volumes in this grade of coal are expected to rise in the proportion of coal exports to India. Several of the acquisitions made by Indian power generation companies in Indonesia have been in coal blocks that will produce coal of this grade, and a blanket ban on the exports can jeopardize power plant development in India.
On the other hand, the domestic Indonesian market may not be prepared to consume all the coal mined of this grade in view of the power generation capacity addition plans in Indonesia. In such a case, the coal mine development is likely to be deferred. The Indonesian law makers may need to reconsider domestic market demand, investment climate in coal sector and impact of the legislation on the export revenues.
What is the alternative source for Indian power industry if the proposed coal export ban come into effect by 2014?
Indian power generation companies have been forced to look out for coal assets abroad due to the investment and regulatory environment within the country. India boasts of more than 110 billion tonnes of coal reserves, which largely fall within a 300 meters of depth. If the regulatory and investment environment is amended to allow greater participation of private sector Indian dependence on imports will be reduced.
However, for imports, India will continue to look at Indonesia, South Africa, Australia and newer destinations like Mozambique and Columbia. But these sources also have constraints, domestic demands in South Africa is likely to restrict quantum jump in exports out of South Africa. Indonesia has also proposed domestic market obligations. Mozambique may have infrastructure constraints for large volumes of coal being transported from Tete province to ports of Maputo, Ncala or Beira. Australian coal is of high quality but may have higher costs of mining and transport.
What would be the additional cost if Indian consumers switch their sourcing origin from Indonesia?
Indonesia has competitive advantage due to its geographical closeness. However, on a per tonne basis, assuming comparable quality, costs of transport may make marginal difference when compared with South Africa and Mozambique.
When compared to Australian coal, due to the high quality, cost of energy may well be comparable even though shipping costs are higher. Between Indonesian coal (5500 kcal/kg adb priced at USD 90 per tonne) and Australian coal (6500 kcal/kg adb priced at USD 120 per tonne), indicative variable cost difference of power generation may be about Indian Rupees 0.20 to 0.30 per kWh (electricity unit) in favor of Indonesian coal.
Will it affect Indian economy growth or this coal export ban is ignorable as India can easily identify alternative sources of fuel?
The magnitude of growth in power generation in India will necessarily mean that coal will remain the mainstay. Natural gas has had issues of availability. Nuclear plant development is facing socio-political challenge in view of the risks of technology failure. Development of hydel power has also faced issues of land acquisition, rehabilitation & resettlement apart from the technical issues of hydro-geological features. Renewable sources such as solar and wind generation are still projected to constitute a small portion of India power generation mix. Identifying an alternative source that can match coal in its accessibility, availability and affordability in the context of scale of capacity addition required in India is a challenge.
What is the Indian government's role on this issue, whether government has to come out with the solution such as easing Indian mining and environment law, open up mining for foreigners, G2G arrangement, etc…?
There is a need to look at domestic sources with pro-active and constructive approach and make all necessary legal and statutory amendments that make the resources available and mineable. Easing the regulations may not be one of such measures but making those regulations work in sync with each other in a time bound and predictable manner must certainly be.
There is certainly a case for opening the domestic coal sector for private participation, including independent miners, and for foreign participation so that newer technology and enhanced scale of operations are implemented in India. The regulation also needs to permit risk capital to come in for prospecting and exploration.
For imports the G2G relations can be leveraged to secure coal assets. India has good relationship with Indonesia and has also signed a tax treaty with Mozambique in 2010 which will facilitate investments. Government may also engage with these countries to ease exports to India and extend fiscal support to coal mining companies investing in mining and associated infrastructure development.
About Dipesh Dipu
Dipesh Dipu works as Director with Deloitte Touche Tohmatsu India Pvt. Ltd in the Energy and Resources consulting practice of the firm and anchors the Firm’s initiative in the mining and metals sectors.
He is a mining engineering graduate from Indian School of Mines and is a Chartered Financial Analyst (CFA). He has also done executive program in business management from Indian Institute of Management Calcutta. Dipesh has recently been awarded the Abheraj Baldota Gold Medal for the Young Mining Engineer of the Year 2007 by the Mining Engineers’ Association of India in recognition of his contributions in the improvement of mining industry in India.
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- Jindal Steel & Power Ltd - India
- Sakthi Sugars Limited - India
- Gujarat Sidhee Cement - India
- Metalloyd Limited - United Kingdom
- Maheswari Brothers Coal Limited - India
- Banpu Public Company Limited - Thailand
- Coal and Oil Company - UAE
- Heidelberg Cement - Germany
- Sindya Power Generating Company Private Ltd
- Indian Energy Exchange, India
- Bahari Cakrawala Sebuku - Indonesia
- Mercator Lines Limited - India
- Oldendorff Carriers - Singapore
- Savvy Resources Ltd - HongKong
- Orica Mining Services - Indonesia
- Samtan Co., Ltd - South Korea
- Indogreen Group - Indonesia
- TeaM Sual Corporation - Philippines
- Independent Power Producers Association of India
- Lanco Infratech Ltd - India
- Central Java Power - Indonesia
- Ind-Barath Power Infra Limited - India
- Indonesian Coal Mining Association
- Edison Trading Spa - Italy
- Price Waterhouse Coopers - Russia
- Electricity Authority, New Zealand
- Trasteel International SA, Italy
- Coastal Gujarat Power Limited - India
- Toyota Tsusho Corporation, Japan
- IHS Mccloskey Coal Group - USA
- Vedanta Resources Plc - India
- India Bulls Power Limited - India
- Bhoruka Overseas - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Singapore Mercantile Exchange
- Cigading International Bulk Terminal - Indonesia
- Straits Asia Resources Limited - Singapore
- Rio Tinto Coal - Australia
- Bulk Trading Sa - Switzerland
- Deloitte Consulting - India
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- Binh Thuan Hamico - Vietnam
- Thiess Contractors Indonesia
- Posco Energy - South Korea
- Ministry of Mines - Canada
- Timah Investasi Mineral - Indoneisa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PTC India Limited - India
- Thai Mozambique Logistica
- Wood Mackenzie - Singapore
- Wilmar Investment Holdings
- International Coal Ventures Pvt Ltd - India
- White Energy Company Limited
- ICICI Bank Limited - India
- Goldman Sachs - Singapore
- Tamil Nadu electricity Board
- PowerSource Philippines DevCo
- Intertek Mineral Services - Indonesia
- The State Trading Corporation of India Ltd
- Gujarat Mineral Development Corp Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Makarim & Taira - Indonesia
- Global Business Power Corporation, Philippines
- Indian Oil Corporation Limited
- Kohat Cement Company Ltd. - Pakistan
- Formosa Plastics Group - Taiwan
- Mintek Dendrill Indonesia
- Directorate Of Revenue Intelligence - India
- Pendopo Energi Batubara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- ASAPP Information Group - India
- Indo Tambangraya Megah - Indonesia
- VISA Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Attock Cement Pakistan Limited
- Standard Chartered Bank - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aboitiz Power Corporation - Philippines
- Kumho Petrochemical, South Korea
- Xindia Steels Limited - India
- Riau Bara Harum - Indonesia
- Sinarmas Energy and Mining - Indonesia
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- Manunggal Multi Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- Australian Commodity Traders Exchange
- Australian Coal Association
- Jaiprakash Power Ventures ltd
- Mercuria Energy - Indonesia
- Orica Australia Pty. Ltd.
- Port Waratah Coal Services - Australia
- Asmin Koalindo Tuhup - Indonesia
- Malabar Cements Ltd - India
- Central Electricity Authority - India
- Altura Mining Limited, Indonesia
- IEA Clean Coal Centre - UK
- Alfred C Toepfer International GmbH - Germany
- Leighton Contractors Pty Ltd - Australia
- Eastern Coal Council - USA
- GN Power Mariveles Coal Plant, Philippines
- Chamber of Mines of South Africa
- Romanian Commodities Exchange
- Latin American Coal - Colombia
- Coalindo Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Transport, Egypt
- Semirara Mining and Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Parry Sugars Refinery, India
- Kaltim Prima Coal - Indonesia
- Siam City Cement - Thailand
- Energy Link Ltd, New Zealand
- Kartika Selabumi Mining - Indonesia
- Economic Council, Georgia
- Uttam Galva Steels Limited - India
- Tata Chemicals Ltd - India
- Meralco Power Generation, Philippines
- Carbofer General Trading SA - India
- Bhushan Steel Limited - India
- Renaissance Capital - South Africa
- Siam City Cement PLC, Thailand
- Aditya Birla Group - India
- Planning Commission, India
- Medco Energi Mining Internasional
- Karbindo Abesyapradhi - Indoneisa
- San Jose City I Power Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Sojitz Corporation - Japan
- Energy Development Corp, Philippines
- Petron Corporation, Philippines
- MS Steel International - UAE
- Chettinad Cement Corporation Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Billiton Holdings Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Baramulti Group, Indonesia
- PNOC Exploration Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Bhatia International Limited - India
- Simpson Spence & Young - Indonesia
- Bangladesh Power Developement Board
- Anglo American - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Africa Commodities Group - South Africa
- Salva Resources Pvt Ltd - India
- CNBM International Corporation - China
- The Treasury - Australian Government
- Maharashtra Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- SN Aboitiz Power Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- European Bulk Services B.V. - Netherlands
- Bharathi Cement Corporation - India
- Power Finance Corporation Ltd., India
- Bukit Baiduri Energy - Indonesia
- Antam Resourcindo - Indonesia
- Dalmia Cement Bharat India
- Interocean Group of Companies - India
- Electricity Generating Authority of Thailand
- McConnell Dowell - Australia
- Indika Energy - Indonesia
- Grasim Industreis Ltd - India
- Sarangani Energy Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Kideco Jaya Agung - Indonesia
- New Zealand Coal & Carbon
- Mjunction Services Limited - India
- GVK Power & Infra Limited - India
- Cement Manufacturers Association - India
- Global Coal Blending Company Limited - Australia
- Agrawal Coal Company - India
- Semirara Mining Corp, Philippines
- GMR Energy Limited - India
- Sree Jayajothi Cements Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Star Paper Mills Limited - India
- Karaikal Port Pvt Ltd - India
- Sical Logistics Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Essar Steel Hazira Ltd - India
- London Commodity Brokers - England
- Meenaskhi Energy Private Limited - India
- Kapuas Tunggal Persada - Indonesia
- CIMB Investment Bank - Malaysia
- Jorong Barutama Greston.PT - Indonesia
- Commonwealth Bank - Australia
- Barasentosa Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Madhucon Powers Ltd - India
- Ministry of Finance - Indonesia
- Eastern Energy - Thailand
- Minerals Council of Australia
- Marubeni Corporation - India
- Borneo Indobara - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Vizag Seaport Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Georgia Ports Authority, United States
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Parliament of New Zealand
- Videocon Industries ltd - India
- SMG Consultants - Indonesia
- GAC Shipping (India) Pvt Ltd
- Therma Luzon, Inc, Philippines
- Ambuja Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Merrill Lynch Commodities Europe
- SMC Global Power, Philippines
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