Indonesian coal is exported around the globe

The newly elected government in India needs around US$500 billion in infrastructure spending in the five years ending in fiscal year 2012. India is facing a shortage of about 25,000 Mw power during peak hours. There are plans to add close to 78,000 Mw of power during the current five-year plan.

Some big Indian companies are making their best efforts to acquire mines overseas specially in Indonesia, South Africa, Mozambique, Australia etc. for their ambitious power projects in India. At present Indonesian law does not permit a foreign company to directly acquire the mines. There is no clarity as to how foreign companies can have mining rights and start production.

Indonesia’s government needs to accelerate reforms and changes in mining and energy regulations designed to give direct control to foreign investors, in order to win confidence and attract/invite major international coal companies into Indonesia.

Indonesia has come from nowhere to challenge Australia as the world’s largest exporter of thermal coal and is expected soon to topple Australia as the largest coal exporter. Indonesia’s strategic geographic location makes it the most preferred country for Indian companies for its proximity to the country, which means lower ocean freight charges and better timing compared to other countries such as Australia.

Indonesian coal is exported around the globe, including to India, Korea, Taiwan, Japan, EU, US and China which itself is a major coal producer but imports coal to meet the requirement of domestic industries.

The growth in Indonesia’s coal exports reflects the ability of its coal industry to respond to the rapid growth in Asian demand for thermal coal, supported by unconstrained transport and port capacity. A significant proportion of coal transport in Indonesia is water based, which allows for coal to be transported along rivers via barges to the open sea for loading onto larger vessels

The quality of Indonesian coal is much better than Indian coal. The gross calorific value of Indonesian coal ranges between 5,000 and 6,500 kilo calories per kilogram (kcl/kg); while for Indian coal it is only 3,000-4,500 kcl/kg.

India’s ambitious plans to generate an additional 78,000 Mw of power in five years may face hurdles if Indonesia goes ahead with plans to implement a domestic market obligation (DMO) policy to restrict coal exports to take care of domestic demand.

India is today one of the fastest growing economies and also has a shortage of power supply. Indonesia is one of the peaceful countries with huge natural resources and exporting coal to many countries for use in power plants for generating energy but it is paradoxical that Indonesia is short of energy. Many Indian companies are capable of sharing power technology and setting up mega power plants in Indonesia.

Indonesian private companies can buy equity stakes in India’s power plants in exchange for long-term coal supply. Since India is today one of the fastest growing economies and also has a shortage of power supply then such deals can be beneficial to both parties. source : thejakartapost.com