Indonesian Law To Upset Coal Price Equation.

NEW DELHI: Indian power developers have sought government intervention as a new law in Indonesia, the largest coal supplier, makes imports economically unviable. Indonesia has said it would not allow exporting companies to sell coal at prices below notified rates after September 23.

Australia issued a draft mining law 10 days ago to impose levy on coal and iron ore projects from next year. Association of Power Producers, a group of 13 private companies, has asked power ministry to set up an expert committee to find appropriate solution to tackle rise in imported rates. The body representing companies like Tata Power , Reliance Power , Adani Power , Lanco Infratech and Essar Power, has also demanded that change in fuel cost be allowed to be passed on to the consumers as tariff hike or reduction.

A senior power ministry official said the government was considering the demand. Association director general Ashok Khurana said the current contractual framework does not protect power companies from coal price changes triggered by any change in law in the exporting country.

Power projects worth 43,000 mw, awarded under competitive bidding, are under construction. Khurana said about 30% of this capacity or 13,000 mw is based on imported coal. "Power companies had offered bids based on their agreements with fuel suppliers predominantly in Indonesia. If the companies are not able to honour their commitments, it would be a concern for bankers and consumers," he said.

Besides, country's dependence on imported coal is expected to increase as Coal India has not been able to ramp up production. Coal mining and power sectors are grappling with environment-related issues. Indonesia and Australia contribute about 55% of India's coal imports. The power producers' body said power producers will not be able to honour long-term commitments as the new mining law in Indonesia provides for annual alignment of coal prices with international rates.

The change in coal pricing method is likely to make coal costlier by Rs 1,500 a tonne for Indian power utilities. Until now, there was no regulation by Indonesian government on coal pricing. Australia - that contributes about 5% of imports by Indian power sector - plans to introduce carbon tax and levy on super profits on mining companies. Khurana said after implementation of these laws, Australian coal prices are expected to go up by $20-25 per tonne. Deloitte director consulting (mining) Dipesh Dipu said coal prices might increase as miners in Australia would like to pass on the increase in levies to consumers.

Source : economictimes.indiatimes.com