New pricing method has increased thermal
coal prices by about 30% in Indonesia. It has also raised the cost for Indian
power producers who depend on imports for more than half the generation in the
country.
New pricing technique adopted by
Indonesia, aligning its rates with international markets under the benchmark
prices called the HBA Index, taking the price of coal above $100 a tonne.
55% of power generates through
thermal coal and India imports about 30% from Indonesia of its power
generation. This year, India was tipped to increase its imports from 60 MT and
surpass Japan's 65 MT to become the largest importer of Indonesian thermal
coal. But this may not happen in a hurry now.
More than 60% of India's coal
imports are through spot or short-term contracts and experts say the power
producers are finding the sudden increase in price too sharp for comfort.
Costlier imports are likely to impact the quantity of coal imported from
Indonesia, they say.
S Ramakrishnan, Tata Power's
executive director, finance, commented “Our Company may face a loss up to $100
million due to the new pricing policy. He says the company will blend the fuel
with cheaper coal having low calorific value in order to reduce the cost of
generation. The company imports coal from Indonesia to feed its ultra mega
power project near Mundra that has a capacity of 4,000 MW.”
“Now, importers will have to
renew short-term contracts by paying higher prices. This will impact further buying
quantity,” says Kalpana Jain, senior director, Deloitte India, a
consultancy and advisory firm.
Adani Power, which has a stake in Bunyu mines in Indonesia, will also
be impacted but on a smaller scale. “Adanis have their own port and
transportation facilities. They also own coal mines. Therefore, they have an
advantage over the others,” says Deven Choksey, MD of KR Choksey
Securities. Adani Power sources 4.6 mtpa coal from Adani Enterprises at
$36 per tonne and the total import requirement for the operational capacities
is up to 6 mtpa.
Besides private producers,
state-run Coal India also imports coal from Indonesia, mainly to feed NTPC and
other public sector units.
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