Infrastructure Capacity Building of Rail,

Ports etc
Import of Coal from Indonesia.

Presentation Title

Coal Summit
New Delhi, 21st September 2011
Arun Srivastava
The Tata Power Company Ltd

For limited circulation only

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1 Power Trading Company Ltd.
For any reproduction or recirculation approval must be obtained from Tata

Presentation Structure
Tata Power Company Ltd.
Coal Scenario
Logistics Issues
Import from Indonesia
Macro Factors
Points to Ponder

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Tata Power Company Ltd.

The largest integrated energy company in private sector in India
In operation since over a 100 years
o Installed generation capacity of 3,163 MW, another 14,000 MW under
execution
o Presence in Generation, Transmission and Distribution
o Renewable energy technologies; and
o Coal mining and transportation

Shaping Indias power industry through

o Innovative services & products
o Adoption and assimilation of new technologies

Developed the largest imported coal based project in the country

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Coal - Overview

India Presents a Paradox Scarcity in the

Land of Plenty

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Coal - Overview
India has one of the biggest coal reserves in the world over 286 BT
o Estimated to be enough to last at least a century
o Till recently largely meeting our requirements
o Coal rightfully being exploited to meet Indias growing energy demand

Supply scenario got completely changed in the recent years

o Domestic coal sector not geared to meet the demand
o Highly regulated
o In efficient block allocation to captive users

Coal imports to India having double digit growth

o Port and railway infrastructure would need to be augmented to support
the demand
o The recent unpredictability about coal adds to the growing energy
security concerns

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Demand Supply Balance

Million Tonnes

COAL REQUIREMENT (2016 - 17)

Total Coal Requirement

850

Likely Availability from Various Indigenous Sources CIL et.al

500

Captive Coal Blocks Allotted to Power Utilities

100

Sub-Total (Total Indigenous Production)

600

Shortfall

250

Total Coal Import to meet the gap (Equated quantity - approx)

210

Coal Imports would nearly double in five years

-Internal Analysis, discussions with various market participants

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Demand Supply Balance

Coal production stagnated during the period 2009 - 11 at around 431 MT
Thermal power plants are reeling under severe coal crisis
o Coal stocks at the power houses are precariously low
o Coal stocks at the mine end are reportedly increasing

There are already reports of stranded capacities

o Import of coal by these stations also does not help on account of high costs
o NTPC also reportedly faces this challenge despite fuel cost being a pass
through under the PPAs
o Projects awarded through bid have no such comfort

To achieve energy security restructuring of the indigenous coal industry is

extremely critical and urgent

Stop gap arrangements may not be enough

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Coal for Power - The Emerging Scenario

The key categories of power projects would include:
Coal Source
Indigenous

Coal Availability Through

Long-term coal linkage (Administered Price)
Linked coal mine allotted through government
dispensation route
Mine allotted through a process of competitive bidding

Imported

Entirely on imported coal

Combination

Indigenous and imported coal in varying proportions

All these projects would compete on tariff, in the same

power market, mostly under the Case - 1 framework.
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Port Logistics

India

Indonesia

Africa

WEST COAST
Gujarat
Maharashtra
Goa
Daman & Diu
Karnataka
Kerla
Lakshadweep

# of Ports
40
53
5
2
10
13
10

EAST COAST
Tamilnadu
Pondicherry
Andhra Pradesh
Orissa
West Bengal
A & N Islands

# of Ports
15
1
12
2
1
23

Australia

- Indian Ports Association

- Indicative maps, not to scale

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Limited Port Capacity

Ports - Traffic and Coal Handling Capacity
Current coal
handling
capacity

(Million Tonnes)
Internal Trade

Imports

Handling Capacity
86
79

46

44.2
32.8
16.6

20.5

2000-01

27.8

46
36.1

31.7
25

2004-05

2009-10 P

2011-12 P
- Ministry of Shipping, 2007-08

Port capacity would be a major constraint may need at least

doubling
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Port Logistics (cont.)

Key Issues:
How many ports can accommodate cape size vessels?
o Most cargoes to India are handymax, supramax due to shallow draught
o Often transportation requires mid-sea transshipment
o High cost and increased losses
Geared vessels
o Many ports/jetty working on anchorage + barging, necessitating geared
vessels
o Demurrages
Port availability in monsoons an issue, particularly the western ports

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Coal Port Usage

Coal formed about 13 per cent of total port traffic in 2008-09.
Traffic Handled - Relative share

POL, 33%

12%

Other, 18%

Mundra
Kandla
Okha

Coal, 13%

Porbander

Container,
18%

Iron
Ore, 18%

Haldia
Dahej

Dwarka

Paradip

Surat
Mumbai

Vishakhapatnam

Nhava Sheva (JNPT)

Kakinada
Panaji

- FY 2009, Indian Ports Association

Ennore

Marmagoa
New Mangalore

( Western coast )

Coal Traffic Handled

Chennai

( Eastern Coast )

Coking
6.5

Tuticorin
Cochin

Thermal
38.6

Thermal 5.4

Coking
20.6

Major ports/Minor
ports
Ports with dedicated
coal handling capacity

External traffic - 39 million tonnes

Internal traffic - 33 million tonnes

- Crisil Research, Google Maps

( mi l l i on t onnes (2008 - 09) )

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Port Handling Logistics

Key Issues:
Severe capacity constraints in port handling
o Limited options for stevedoring
o Sub-optimal mechanisation at several ports
o High trade unionism and low labour efficiency
The Impact
o Enhanced down-loading time
o Demurrages and warfage
o Increased port handling costs

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Inland Transportation Logistics

Inland logistics heavily loaded
Distance From Coal Mines (Kms)
Pit Head
Up to 500
501 1000
1001 1500
Over 1500
Total

Demand
37 %
28 %
15 %
14 %
6%
100 %

35% of indigenous coal

travels over 500 kms.
14% travels over 1000 kms.

- Ministry of Coal

Rail
High ash in coal increases quantity to be transported straining the rail
infrastructure further
Scenario expected to worsen in the coming years,
About 40% of thermal coal produced will have to be transported over 500 km
Increased transmission costs have made wheeling of power as expensive
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Inland Logistics (cont.)

Mode of Transport
Railways (Including Rail-cum-sea)
Road
MGR System
Others (Belt Conveyor Ropeways, Rail-cum-Sea Routes etc.)

56%
17%
23%
4%

Total

100%
- Ministry of Coal

Inland coal haulage capacity will have to be doubled by the end of 12th
plan and tripled by 2025
For long distances, road transport highly uneconomical, unreliable and
damaging to environment
Innovative & modern logistics planning key to long term viability
Internal Analysis

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Inland Logistics Railways

Coal accounts for close to 45% of the total
loading of IR
IR handled 397 MT of coal in 2009-10
-Dedicated Freight Corridor Corporation of India Ltd

Current capacity utilization is more

than 115-150% on the Eastern and
Western Corridors
Railways will be required to haul
over 600 Mn tons coal by 12th plan
TY, 700 MnT by 2020

Share of Coal Load FY 09-10

Rest
18%

Steel
Plants
11%

Thermal
PP
71%

IR Coal Freight (Mn Tons)

700
600
480
365

FY 08-09

FY 11-12

FY 16-17

FY 20-21

-Internal Estimates, Indian Railways, IR Vision 2020

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Inland Logistics Railways (Contd)

Major Coal Rail Routes

o Western: JNPT-Ahmedabad-RewariDadri

Ludhiyana

West. DFC 1483 km

Delhi

Ajmer

IR is developing two DFCs (bulk +

container)

o 128 Million Tons by FY 22

Dadri

o Eastern: Dankuni-Gomoh-SonnagarMughalsarai-Kanpur-Khurja-Ludhiana

East. DFC 1806 km

Mughalsarai

o
Kandla

Ranchi
Vadodra
Kolkata

JNPT
Hyderabad
Panaji
Kavaratti

Vizag

144 Million Tons by FY 22

IR Vision 2020: start work on four

more DFCs
o Delhi to Chennai, Howrah to Mumbai,
Southern (Chennai to Goa) and EastCoast (Kharagpur to Vijaywada)

Chennai

-Dedicated Freight Corridor Corporation of India Ltd

Might be too little, too late

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Coal - Overview

The Indonesian Option

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Spread of Coal Sources- Indonesia

Coal sources in Indonesia

8%
34%
3%
SUMATRA

KALIMANTAN

39%

16%
I N D O N E S I A

Source: Center for Geology,Geology Agency 2006, Map: Google Maps

Coal is primarily located in East and South Kalimantan and South

Sumatra
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Key Characteristics
Sumatra, coal is located beyond 100-150 kms of the sea
Kalimantan, coal near the sea is mostly exploited
Kalimantan has lot more coal, however is a hostile terrain
Newer opportunities exists but in the hinterland
Located on the Equator, rains for more than six months
Most railway network exists on Java Island
No economical way of getting coal from Central Kalimantan

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Inland Transport - Indonesia

Excessive water content
and low altitude, results in
slushy soil
Not suitable for rail roads

Significant amount of coal

travel along rivers via
barges
Coal often moves over 300
km on barges
Long trucking/barging
increases cost
Trucking is often done illegally
on public roads

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Ports and Shipping - Indonesia

Major Ports:
Kalimantan

Sumatra

Banjarmasin, South Kalimantan

North Pulau Laut Coal Terminal , South
Kalimantan
Tanjung Bara Coal Terminal, East Kalimantan
Balikpapan Coal Terminal (BPCT), East
Kalimantan
Bontang Coal Terminal and

Teluk Bayur, West

Sumatra
Kertapati Coal Port
Muarasabak Coal
Terminal
Pulau Baai Coal Terminal
Tarahan Coal Port

Indonesian Bulk Terminal (IBT)

For miners not using a coal terminal

Coal taken to high seas, trans-shippers or mechanized vessels to
employed
Many local players have created coal stock yards, blending facilities
Low drafts limit the size of ships which can be aligned to jetties
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Ports and Shipping (Cont.)

Offshore transshipment has a poor loading capacity
coal is loaded using the coal vessels own loading gear
without such gear, coal vessels over Panamax Size cannot be accepted.

Berau and Adaro introduced floating cranes,

increased transshipping capacity
accommodation of large vessels.

Kideco uses Cape Size vessel with gear, owned by a Korean shipping
company
used exclusively as a coal vessel for shipments to Korea.

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Other Issues
Mafia, local chieftain
Most Roads controlled by local land owners
Rates per truck are agreed for RoW

Grade of coal and sampling

Only vendors like SGS, Sucofindo are recommended

Paying at discharge port or the load port

Theft and piracy

Contract performance and governance is typically weak

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Macro Factors

The Final Frontier - Market Acceptability

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End-use Pricing of Power

Average Retail Price of Electricity - USA

Power tariffs in the US

10
Cents / kWh

Average Retail tariff for the Ultimate

Customers by End-Use Sector

12

6
~10 Cents is roughly Rs. 4.6 /kWh
4
Prevailing retail tariffs in India: 3 to
2
5 Rs./kWh, correspond to 20 to 30
0
Commercia
cents at PPP
Residential
Industrial
All Sectors
l
2009
11.32
10.03
6.65
9.67
Indian power tariffs are amongst
2010
11.42
10.15
6.88
9.83
the highest in the world (PPP
- U.S. Energy Information Administration
basis)
Significant use of high cost imported coal will necessitate
upward revision of tariffs further

TO BE PAID EITHER BY THE RATE PAYER OR THE TAX

PAYER
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Points to Ponder
Can Indian power sector afford imported coal?
Does India have any other option but to open up the coal sector in a
meaningful way?
If signals from Indian energy market continues to emanate as they are,
there could soon be a global Coal Shock
To overcome structural inefficiencies in the indigenous coal industry India
entrepreneurs are forced to look beyond for investments to secure
supplies
o Country has huge developmental requirements
o Money should be channeled here for local wealth creation

Coal market is big enough to provide opportune

growth potential to both Public and Private Sector
need to ensure level play
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Brief Profile Arun Srivastava

Associated with Energy sector for over 3 decades
Organisation Associated With

Year

Tata Power, VP, Regulations and Advocacy

May 2011

Ernst & Young, Executive Director, Business Advisory

2002 11

Arthur Andersen

1998 02

Marubeni Corporation (Japan)

1998 98

NTPC

1981 98
Deputation to IP Cell, Ministry of Power, GoI 1995 98
Deputation to Planning Commission, GoI 1988 91

Coal India Limited

1981 81

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