KOLKATA (miningweekly.com) - The Indian government would seek an agreement with its Indonesian counterpart to accord Indian coal companies “special status” under which coal blocks could be allocated through the nomination route.

The decision for an agreement on “special status”, akin to “most favored nation status”, was taken at a recent meeting of the India-Indonesia Joint Working Group on Coal, set up under the aegis of India’s Coal Ministry.

A delegation of officials from the Indian Coal Ministry and Coal India Limited (CIL), would visit Indonesia shortly for follow-up talks with federal and provincial governments there.

The delegation would hold meetings with foreign investment promotion agency BKPM, the Mineral Resources Ministry, provincial governors and officials of the Indian embassy in Indonesia. The Indian government would also support setting up a foreign direct investment (FDI) company, promoted by CIL and headquartered in Indonesia, after identification of possible coal concessions.

According to an official document of the Joint Working Group, “The Indonesian government’s assistance would be sought in the allocation of large greenfield coal concessions on a nomination basis, which could be unallocated coal blocks or blocks where no progress had been made in exploration”.

“It would be impressed upon provincial and regional governments the importance of a special status (most favored nation type) to Indian government-controlled coal companies to facilitate bilateral business relationship between the two companies,” the document said.

The strategic importance of a bilateral India-Indonesia agreement in meeting India’s rising demand for coal was underlined, and the Joint Working Group identified the advantages of coal imports from Indonesia as the high availability of coking coal in the central Kalimantan province and thermal coal in south Kalimantan, new mining laws permitting FDIs in coal mining, cheap inland transport in the form of barges, the availability of open sea loading capacity and low maritime freight. The latter being the main reason Indonesia accounting for 60% of all thermal coal imports into India.

However, from India’s perspective, a few Indonesian policy issues would have to be settled before formalising the contours of any bilateral agreement on allocation of coal blocks through nomination.

These include banning the export of Indonesian coal above a certain specification, thereby limiting resources available for export, limiting FDI in coal mining, uncertainties over domestic market obligations like price, grade and quantity, as well as government incentives available for investments made on infrastructure development.

The Indian representatives of the Joint Working Group also noted stipulations for higher investments in demoisturising lower calorific value coal despite no proven technology for achieving this.

“Apart from Mozambique, Indonesia is the only country identified by the Coal Ministry where both coking and thermal coal imports could be sourced into India and hence the importance of an agreement with the country,” Coal Ministry officials said.

India has indentified Australia, Mozambique, Indonesia, the US and Canada as potential sources for the import of coking coal and Indonesia, South Africa and Mozambique for imports of thermal coal.

India’s imports of coal by the end of the current year have been projected at 89-million tons, rising to 265-million by 2016, with a ten-year compounded annual growth rate (CAGR) of 15.5% and a 20-year CAGR of 13.2%.
 

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