Indonesia has circulated a draft decree seeking comments on imposing a ban on export of coal below 5,100 gross kilo calories per kg from 2014.

Earlier regulation

A few months ago Jakarta brought in regulations that called for all coal exports to be benchmarked to international prices. The regulation also set aside all prior agreements and understanding mining companies had entered into.

This put Indian power companies such as Tata Power and Reliance Power in a quandary as they had bid aggressively for thermal plants here based on their deals in Indonesia.

With coal prices soaring, Both Tata Power and Reliance Power have sought a review of the tariff structure stating that the current coal prices would make their projects unviable.

According to Mr James O' Connell of Platts International, the Indonesian decree would bring down exports by 120-130 million tonnes if implemented and India would have to bear the brunt of the scarcity. Indonesia exported 270 million tonnes in 2010.

India, he said, imports coal grades from 5,000 Kcal/ kg to as low as 3,500 kcal/kg from Indonesia. As Indonesia wants about 82 million tonnes – or a fourth of the production in the country – for its own plants in 2012, such a move will cap exports to ensure a greater availability for domestic consumption.

WIDENING DEFICIT

The Centre wants add 16 GW (gigawatts) in 2011-12, while it added nine GW in 2010-11, which calls for 40 million tonnes of additional imports, he said.

Mr Sriprakash Jaiswal, Coal Minister, recently said demand for the current fiscal was expected to be 696 million tonnes, against domestic output of 554 million tonnes. This would lead to import of over 110 million tonnes from about 82 million tonnes recorded last year.

For 2010-11, Coal India produced 431.32 million tonnes, fractionally higher than that clocked last year.

Mr O'Connell said the state-owned company has registrations from buyers for 721 million tonnes up to March 2012, by far more than its production target. Coal India has received about 27 offers for its 10-year long-term offtake tender for imported thermal coal.

Why go abroad?

A Standard Chartered report said assuming India sourced 60 per cent of coal it requires from its own mines, it would still need to build an additional 106 million tonnes of coal capacity in the next five years. This is double of Australia's planned expansion over the same period and two-thirds of Indonesia's planned growth. This shows why Indian consortia are spending so much money buying coal projects in Indonesia, Australia and Mozambique, the report said.

Further, for a 10 per cent annual growth assumption in generation capacity, imports would grow by 125 per cent to 164 million tones by 2015, which could push coal prices above $200 a tonne.