Indonesia's new mining laws might prove to be another blow to coal supply and coal prices in India
October 22, 2009
The recent hike in coal prices have already spelt trouble for cement and power companies in India. Coal supply and coal prices are likely to suffer another massive blow, given new mining laws for coal in Indonesia. Indonesia, which is one the major suppliers of coal to India, now plans to cap its exports for domestic demand.
Analysts believe that cement and power companies have already planned their capacities over and above the potential coal supply from Indonesia. "Indonesia does not have the capacity to export sufficient coal to India. Moreover, Indian companies will now have to seek coal from other places. Since many cement companies as well as power producers from the coastal areas have tied up with Indonesia for coal supply, the shortage will adversely affect them,” said an analyst from a leading brokerage.
After issuance of a new mining law, the Indonesian government is planning to cap around 150 million tonnes coal exports annually from 2010 onwards. Given India’s high dependence on Indonesian coal, sectors like cement and power are likely to be hit adversely. Indonesia wants to secure coal supply for its domestic power plants under the 10GW fast-track project.
Cement industry players, on the other hand, are now desperately seeking help from the Indian government to tackle the coal shortage.
"We are in constant talks with the government for increasing coal allotments to the cement industry which has been brought down to 50% from 75%. We have been asking for 100% allotment. Now that we have a stable Union government in place, they will understand and support the industry," said R Gurumoorthy, spokesperson, Dalmia Cement Ltd.