India seeks bilateral talks with Indonesia on coal exports

The Indian government has sought bilateral talks with Indonesia to convince the country to reconsider tariff and nontariff restrictions on coal exports, which were threatening the feasibility of a large number of Indian power projects.
The suggestion of bilateral talks was mooted by the India-Indonesia Joint Working Group for Coal, with initiatives for a government-to-government negotiation likely to be taken at Prime Minister level.
“Indonesia has restricted exports of certain grades of coal from January 2012. These restrictions would also be applicable for many Indian companies having coal ventures in that country,” Coal Secretary Alok Perti said.
“The import price of Indonesian coal has already gone up by $20/t to $50/t and this has created problems for many power producers here and the latter have raised the issue with Prime Minister Monmohan Singh during a recent interaction,” he said.
The problem could become more serious if countries like Australia and South Africa also impose similar restrictions on coal exports, he added.
Bilateral talks with the governments of Australia and South Africa have also been suggested by the Coal Ministry to pre-empt coal export restrictions and the continuation of “friendly pricing regimes” by these countries.
In January, Indonesia stopped the export of coal with a calorific value of below 5 100 kcal/kg unless it is increased to 5 700 kcal/kg by lowering moisture content. The new regulation would also benchmark export prices against the Indonesian government’s own export prices, which have been increased. This was expected to prevail over all agreements between mining companies and international buyers.
In 2011, Indian power producers imported 42-million tons of thermal grade coal from Indonesia, edging past China as the country’s largest coal buyer.
The Indonesian restrictions on coal exports have impacted the feasibility of a large number of Indian ultra mega power projects including the 4 000 MW Mundra project and Krishnapatnam project, both based on imported thermal grade coal from Indonesia.
Under the new restrictions, long-term agreements between Indian power companies with coal suppliers in Indonesia, which were either based on discounts or a flat pricing regime, would not be honoured, resulting in similar power plants being placed on hold until the Indian government intervenes.
Tata Power’s Mundra project, of which one unit of 800 MW has started generation, would require two-million tons a year of imported coal. The company has a 30% stake in PT Bumi Resources in Indonesia, which produces around 60-million tons a year but this would not enable the company to circumvent the Indonesian export restrictions and supply to its Indian power plant at discounted prices.
Coal Ministry officials acknowledged that bilateral negotiations for more favorable coal prices would be protracted. But as a short-term measure to partially alleviate the impact of the high cost of imported coal the Indian government was contemplating reducing or removing the 5% basic import duty on coal. An announcement could be expected in the forthcoming Union Budget scheduled for mid-March.
Source: Mining Weekly
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