A Common Heritage A Shared Future
-Special Report on Indian coal mining business in Indonesia
Tempo English(No.1323), Feb. 03, 2013 (Jakarta)
Introduction
LAST DECEMBER, INDIA AND ASEAN CELEBRATED 20 YEARS OF DIALOG AND PARTNERSHIP, WITH TRADE EXPECTED TO
INCREASE 30 PERCENT OR U$100 BILLION BY 2015. IN INDONESIA, INDIAN INVESTORS TODAY ARE WELL KNOWN IN TWO DOMINANT SECTORS.TEXTILE AND COAL. WHILE TRADE AND INVESTMENT BETWEEN THE TWO COUNTRIES ARE GROWING, AND GOVERNMENT RELATIONS ARE PROBLEM FREE, THERE MUST BE MORE EFFORT TO BRING THE PEOPLES OF THE TWO NATIONS.WHICH SHARE SIMILAR HISTORY AND CULTURE.TOGETHER. ●
LAST DECEMBER, INDIA AND ASEAN CELEBRATED 20 YEARS OF DIALOG AND PARTNERSHIP, WITH TRADE EXPECTED TO
INCREASE 30 PERCENT OR U$100 BILLION BY 2015. IN INDONESIA, INDIAN INVESTORS TODAY ARE WELL KNOWN IN TWO DOMINANT SECTORS.TEXTILE AND COAL. WHILE TRADE AND INVESTMENT BETWEEN THE TWO COUNTRIES ARE GROWING, AND GOVERNMENT RELATIONS ARE PROBLEM FREE, THERE MUST BE MORE EFFORT TO BRING THE PEOPLES OF THE TWO NATIONS.WHICH SHARE SIMILAR HISTORY AND CULTURE.TOGETHER. ●
Round-up Story
A ROUND 500 meters from the entrance to Pasar Baru, Central Jakarta, there is a line of dozens of textile shops called Ganesha, Bombay, Alta Moda and so forth. The word ‘discount’ is posted large on almost every shop front. Brocade dominates what they sell. Men and women go in and out, holding plastic bags of their purchases. This is one of the best
places in Jakarta to buy quality cloth. Hariom’s is known as one of the most exclusive in the area.
In an area of around 6x5 meters, rolls of grey, white, cream, light blue cloth and in the other classic colors are stacked up
against one wall of the shop. Most of the material is suitable for suits or gowns. One meter can fetch more than a million rupiahs here.
The business, now owned by an Indonesian of Indian descent, first opened in Indonesia in 1930. Starting out in Surabaya, it then opened shops in Pasar Baru, and in South Jakarta’s Fatmawati and Plaza Senayan Mall. “We have already been in the textile business for three generations” declared Shabad Vaswani, Hariom’s current Director of Business Development.
Hariom’s is not alone. Textile businessmen from India have been coming here in several waves, beginning in the 70’s, to set
up large-scale factories such as Indorama, Indo Bharat Rayon, and Polysindo-Texma-co. “The quality of workmanship of Indonesian textiles is good and their precision high,” Ministry of Industry’s Director General of International Collaboration, Agus Tjahjana said, explaining the business’ popularity. Although the textiles sector is not new to Indonesia, interest in it still remains strong. In 2011, the sector’s total investment ranked second of all of India’s investments here. It was over US$12 million.
In the last few years, another sector has attracted investors more, though: mining. In 2011, Indian businesses’ investment
in Indonesia totaled over US$16 million. “As long as the investment stacked up, they (Indian businessmen) wanted to invest here,” Agus explained.
One of India’s major demands that can be met from Indonesia is that for coal. No less than 55 percent of Indian power stations use coal.which is now in short supply. Hence, India really needs Indonesia in order to help it meet its energy demands.
This opportunity has led many Indian textile entrepreneurs to get into the mining sector. “The textile industry collapsed about nine years ago. So I got into the coal mining business,” said Ganeshan V., coal miner PT Adani’s CEO. CEO V. K.Sharda of coal trader PT Virema also got into the coal business in 2003, after 35 years of being hands-on in textiles.
The mining business has raised India’s investment in Indonesia. From just US$10 million in 2007, it soared to US$41.9 million in year 2011, for example. In the first quarter of 2012 alone total new investment already exceeded US$30 million. But this number still failed to match the level of India’s investment here during the 80’s: it was then one of the top five investors in Indonesia. “Now it ranks just seventh,” Agus noted. The trade between the two nations is however predicted to continue
to strengthen, with an investment target of US$25 billion to be achieved by 2015.
India’s Ambassador for Indonesia, Gurjit Singh, speaking at the launch of the India Business Forum (IBF) last July, stated that the Forum had been set up to facilitate trade.and simultaneously increase India’s investment in Indonesia.
Textile businessman Shabad Vaswani agrees that the effect of increased investment will be positive for both countries. “The potential of several Indonesian industries combined with the creativity and skills of India’s business people would be very benefi cial,” he declared. “If Hariom’s can survive here for 75 years, anyone else certainly can too,” he stressed. ●
A ROUND 500 meters from the entrance to Pasar Baru, Central Jakarta, there is a line of dozens of textile shops called Ganesha, Bombay, Alta Moda and so forth. The word ‘discount’ is posted large on almost every shop front. Brocade dominates what they sell. Men and women go in and out, holding plastic bags of their purchases. This is one of the best
places in Jakarta to buy quality cloth. Hariom’s is known as one of the most exclusive in the area.
In an area of around 6x5 meters, rolls of grey, white, cream, light blue cloth and in the other classic colors are stacked up
against one wall of the shop. Most of the material is suitable for suits or gowns. One meter can fetch more than a million rupiahs here.
The business, now owned by an Indonesian of Indian descent, first opened in Indonesia in 1930. Starting out in Surabaya, it then opened shops in Pasar Baru, and in South Jakarta’s Fatmawati and Plaza Senayan Mall. “We have already been in the textile business for three generations” declared Shabad Vaswani, Hariom’s current Director of Business Development.
Hariom’s is not alone. Textile businessmen from India have been coming here in several waves, beginning in the 70’s, to set
up large-scale factories such as Indorama, Indo Bharat Rayon, and Polysindo-Texma-co. “The quality of workmanship of Indonesian textiles is good and their precision high,” Ministry of Industry’s Director General of International Collaboration, Agus Tjahjana said, explaining the business’ popularity. Although the textiles sector is not new to Indonesia, interest in it still remains strong. In 2011, the sector’s total investment ranked second of all of India’s investments here. It was over US$12 million.
In the last few years, another sector has attracted investors more, though: mining. In 2011, Indian businesses’ investment
in Indonesia totaled over US$16 million. “As long as the investment stacked up, they (Indian businessmen) wanted to invest here,” Agus explained.
One of India’s major demands that can be met from Indonesia is that for coal. No less than 55 percent of Indian power stations use coal.which is now in short supply. Hence, India really needs Indonesia in order to help it meet its energy demands.
This opportunity has led many Indian textile entrepreneurs to get into the mining sector. “The textile industry collapsed about nine years ago. So I got into the coal mining business,” said Ganeshan V., coal miner PT Adani’s CEO. CEO V. K.Sharda of coal trader PT Virema also got into the coal business in 2003, after 35 years of being hands-on in textiles.
The mining business has raised India’s investment in Indonesia. From just US$10 million in 2007, it soared to US$41.9 million in year 2011, for example. In the first quarter of 2012 alone total new investment already exceeded US$30 million. But this number still failed to match the level of India’s investment here during the 80’s: it was then one of the top five investors in Indonesia. “Now it ranks just seventh,” Agus noted. The trade between the two nations is however predicted to continue
to strengthen, with an investment target of US$25 billion to be achieved by 2015.
India’s Ambassador for Indonesia, Gurjit Singh, speaking at the launch of the India Business Forum (IBF) last July, stated that the Forum had been set up to facilitate trade.and simultaneously increase India’s investment in Indonesia.
Textile businessman Shabad Vaswani agrees that the effect of increased investment will be positive for both countries. “The potential of several Indonesian industries combined with the creativity and skills of India’s business people would be very benefi cial,” he declared. “If Hariom’s can survive here for 75 years, anyone else certainly can too,” he stressed. ●
INDONESIAN COAL RUSH
FOLLOWING TATA POWER’S SUCCESSFUL VENTURE INTO INDONESIA’S COAL INDUSTRY, OTHER INDIAN COAL MINING
COMPANIES ARE NOW RUSHING TO KALIMANTAN AND SUMATRA TO GET A PIECE OF THE ACTION.
ROWS of small brick and wooden houses with zinc roofs, interspersed with convenience stalls, lined up the main street of Langgai hamlet in East Kalimantan province, some 45 minutes drive from the district town of Paser. A white-painted wood portal, guarded by two security guards in blue uniform, greeted visitors at the entrance of the Bima Gema Permata Nuansa Sakti 800-hectare mine complex. A distance away, a cluster of what looked like employee housing could be seen. Driving further on the dusty road, noisy trucks transporting coals go back and forth between the hamlets of Langgai and Petangis.
This is the coal mining site of Oorja Indo Petangis, an Indian company and its local partner, Bima Gema Permata Nuansa Sakti. Oorja has been buying coal from East Kalimantan since 2008. Its head office had sent Indian monitors to oversee Bima’s production of 60,000 metric tons of coal per month. “The Oorja people live at the camp to monitor operations every day,” Arsyat, Oorja public relations offi cer told Tempo English at the site.
This is how Indian coal mining companies operate in Indonesia, through local subsidiaries, because they hold the mining license. “This is because energy ministry regulations restrict foreigners from being part of the management,” said Arsyat. In Oorja’s case, the concession area is managed by Bima, which employs 400 Indonesians. In return, Bima sell the coal exclusively to Oorja.
For the past three months, however, Oorja has been getting its coal from a two-hectare plot in Samarinda,the provincial capital. “Indian mining companies are bound by a contract with the Indian government to supply coal for 15 years,” explained Arsyat.
Indian investors are quite aggressive about expanding their mining concessions in Indonesia. The Indian government requires
companies wanting to supply power generating plants in Indonesia to own mining companies. “The company has a giant ship, berthed at the Balikpapan estuary, which can hold 80,000 metrics tons of coal. All production in Kalimantan is shipped to India every month-and-a-half,” said Arsyat.
Hence the ‘coal rush’ in Indonesia as Indian energy companies compete to secure their of stream of coal supply. But it is ironic
that India, listed as the world’s third largest producer of coal (588.5 millon tons annually), gets its coal from Indonesia, which
is ranked as the sixth largest coal producing country (324.9 million tons annually) in the world, according to the British Petroleum’s 2012 Statistical Review of World Energy. The question arises why India would need to import coal from Indonesia.
“Coal shortage in the country is likely to more than double in the next fi ve years,” said Sriprakash Jaiswal, minister at the Indian Coal Ministry, as quoted by The Hindu in 2011. Demand for coal in India to supply its power, cement and steel plants keep on rising. About 55 percent of India’s power generation is based on thermal coal. So, whatever the production, it seems never enough to supply domestic demand. According to the 2008 Credit Analysis & Research Limited report on the Indian coal industry, locally mined coal--a non-coking variety with high ash content--is of poor quality.
Other factors that contribute to the unreliable domestic coal supply are the same problems prevalent in many developing
countries: bureaucracy, corruption and environmental issues. In addition, coal mining areas in India are located in remote areas like Orissa and West Bengal, with poor infrastructure. Not surprisingly, enterprising energy companies have turned to
sources of coal in nearby countries like Indonesia and Australia.
Indonesia, however, is the most attractive to to Indian importers, given that Indonesian coal is 15 percent cheaper than Australian or even South African coal. So, if India is to sustain its economic growth, it will need to rely some or most of its energy supply on countries like Indonesia. “Indians are high profile players in the industry, especially in coal and nickel,” said Agus Tjahjana, the Industry Ministry’s director-general for international industrial cooperation, at a recent interview with Tempo English. Indian companies are expected to surpass Japanese and Koreans as the leading coal buyers in Indonesia.
Tata was the first to rush into Indonesia for its coal. In 2007, Tata bought a 30 percent stake each of Bumi Resources mining
units, Kaltim Prima Coal (KPC) and Arutmin Indonesia. As such, Tata is able buy 10 million tons of coal from each of the mining
companies annually.
Other Indian energy companies followed suit. With Indonesian mining companies, they bought or went into joint ventures to
operate in the coal mining areas of east, north-east, central and south Kalimantan.
Adani Global now operates a coal mine on Bunyu Island in East Kalimantan. The firm has targeted an output of 10 million tons in 2012/2013 and is currently discussing a project worth US$5 billion and looking at public-private partnership to operate a 2,000 megawatt (MW) power generator.
Reliance Power, another Indian company, announced in August 2010 that it was thinking of investing up to US$5 billion to develop two or three coal mines in South Sumatra and to build a 230-kilometer railway to transport future coal from the mines to a port in Jambi.
However, this enthusiastic business expansion faces several challenges in the coal mining sector, like the legal procedures, the bureaucracy and overlapping land ownership. “In Indonesia, coal, minerals, electricity are under one ministry, which should not be that way,” said Ganeshan V.,CEO of Adani Global.
Ever since coal mining became the main source of incomes in many areas of Kalimantan, land ownership conflicts have intensified. Bima, the local partner of Oorjas, has had to deal with land ownership problems for almost a year.
Another major issue faced by the Indian coal mining business is the increase in coal export tax and limitation of foreign ownership. Last May, the energy ministry announced it would impose a 20 percent tax on exports of unprocessed minerals,
including coal. But a month later, Energy Minister Jero Wacik, rescinded the decision, saying there were no plans to curb exports.
According to the energy ministry, the forecasted coal production for this year and 2014 is over 300 million tons. Indonesia’s
coal boom is predicted to continue for the next decade.
Maybe that is why Indian mining companies plan to stick around. “Doing business is like marriage. The demand is in India and
the supply in Indonesia, it can be married,” said Ganeshan. ●
FOLLOWING TATA POWER’S SUCCESSFUL VENTURE INTO INDONESIA’S COAL INDUSTRY, OTHER INDIAN COAL MINING
COMPANIES ARE NOW RUSHING TO KALIMANTAN AND SUMATRA TO GET A PIECE OF THE ACTION.
ROWS of small brick and wooden houses with zinc roofs, interspersed with convenience stalls, lined up the main street of Langgai hamlet in East Kalimantan province, some 45 minutes drive from the district town of Paser. A white-painted wood portal, guarded by two security guards in blue uniform, greeted visitors at the entrance of the Bima Gema Permata Nuansa Sakti 800-hectare mine complex. A distance away, a cluster of what looked like employee housing could be seen. Driving further on the dusty road, noisy trucks transporting coals go back and forth between the hamlets of Langgai and Petangis.
This is the coal mining site of Oorja Indo Petangis, an Indian company and its local partner, Bima Gema Permata Nuansa Sakti. Oorja has been buying coal from East Kalimantan since 2008. Its head office had sent Indian monitors to oversee Bima’s production of 60,000 metric tons of coal per month. “The Oorja people live at the camp to monitor operations every day,” Arsyat, Oorja public relations offi cer told Tempo English at the site.
This is how Indian coal mining companies operate in Indonesia, through local subsidiaries, because they hold the mining license. “This is because energy ministry regulations restrict foreigners from being part of the management,” said Arsyat. In Oorja’s case, the concession area is managed by Bima, which employs 400 Indonesians. In return, Bima sell the coal exclusively to Oorja.
For the past three months, however, Oorja has been getting its coal from a two-hectare plot in Samarinda,the provincial capital. “Indian mining companies are bound by a contract with the Indian government to supply coal for 15 years,” explained Arsyat.
Indian investors are quite aggressive about expanding their mining concessions in Indonesia. The Indian government requires
companies wanting to supply power generating plants in Indonesia to own mining companies. “The company has a giant ship, berthed at the Balikpapan estuary, which can hold 80,000 metrics tons of coal. All production in Kalimantan is shipped to India every month-and-a-half,” said Arsyat.
Hence the ‘coal rush’ in Indonesia as Indian energy companies compete to secure their of stream of coal supply. But it is ironic
that India, listed as the world’s third largest producer of coal (588.5 millon tons annually), gets its coal from Indonesia, which
is ranked as the sixth largest coal producing country (324.9 million tons annually) in the world, according to the British Petroleum’s 2012 Statistical Review of World Energy. The question arises why India would need to import coal from Indonesia.
“Coal shortage in the country is likely to more than double in the next fi ve years,” said Sriprakash Jaiswal, minister at the Indian Coal Ministry, as quoted by The Hindu in 2011. Demand for coal in India to supply its power, cement and steel plants keep on rising. About 55 percent of India’s power generation is based on thermal coal. So, whatever the production, it seems never enough to supply domestic demand. According to the 2008 Credit Analysis & Research Limited report on the Indian coal industry, locally mined coal--a non-coking variety with high ash content--is of poor quality.
Other factors that contribute to the unreliable domestic coal supply are the same problems prevalent in many developing
countries: bureaucracy, corruption and environmental issues. In addition, coal mining areas in India are located in remote areas like Orissa and West Bengal, with poor infrastructure. Not surprisingly, enterprising energy companies have turned to
sources of coal in nearby countries like Indonesia and Australia.
Indonesia, however, is the most attractive to to Indian importers, given that Indonesian coal is 15 percent cheaper than Australian or even South African coal. So, if India is to sustain its economic growth, it will need to rely some or most of its energy supply on countries like Indonesia. “Indians are high profile players in the industry, especially in coal and nickel,” said Agus Tjahjana, the Industry Ministry’s director-general for international industrial cooperation, at a recent interview with Tempo English. Indian companies are expected to surpass Japanese and Koreans as the leading coal buyers in Indonesia.
Tata was the first to rush into Indonesia for its coal. In 2007, Tata bought a 30 percent stake each of Bumi Resources mining
units, Kaltim Prima Coal (KPC) and Arutmin Indonesia. As such, Tata is able buy 10 million tons of coal from each of the mining
companies annually.
Other Indian energy companies followed suit. With Indonesian mining companies, they bought or went into joint ventures to
operate in the coal mining areas of east, north-east, central and south Kalimantan.
Adani Global now operates a coal mine on Bunyu Island in East Kalimantan. The firm has targeted an output of 10 million tons in 2012/2013 and is currently discussing a project worth US$5 billion and looking at public-private partnership to operate a 2,000 megawatt (MW) power generator.
Reliance Power, another Indian company, announced in August 2010 that it was thinking of investing up to US$5 billion to develop two or three coal mines in South Sumatra and to build a 230-kilometer railway to transport future coal from the mines to a port in Jambi.
However, this enthusiastic business expansion faces several challenges in the coal mining sector, like the legal procedures, the bureaucracy and overlapping land ownership. “In Indonesia, coal, minerals, electricity are under one ministry, which should not be that way,” said Ganeshan V.,CEO of Adani Global.
Ever since coal mining became the main source of incomes in many areas of Kalimantan, land ownership conflicts have intensified. Bima, the local partner of Oorjas, has had to deal with land ownership problems for almost a year.
Another major issue faced by the Indian coal mining business is the increase in coal export tax and limitation of foreign ownership. Last May, the energy ministry announced it would impose a 20 percent tax on exports of unprocessed minerals,
including coal. But a month later, Energy Minister Jero Wacik, rescinded the decision, saying there were no plans to curb exports.
According to the energy ministry, the forecasted coal production for this year and 2014 is over 300 million tons. Indonesia’s
coal boom is predicted to continue for the next decade.
Maybe that is why Indian mining companies plan to stick around. “Doing business is like marriage. The demand is in India and
the supply in Indonesia, it can be married,” said Ganeshan. ●