Minister denies coal export tax plan, endorses restrictions

Rangga D. Fadillah, The Jakarta Post, Jakarta | Fri, 06/08/2012 7:49 AM

Energy and Mineral Resources Minister Jero Wacik has denied that his office had ever proposed a controversial export tax for coal, saying that he preferred to impose a new market control mechanism to secure domestic supply.

 “I never said that we planned to apply a tax or a full ban on coal exports,” he told reporters after accompanying President Susilo Bambang Yudhoyono to meet Royal-Dutch Shell chief executive officer Peter Voser at the Presidential Palace in Jakarta on Thursday.


He explained that the country would need more coal to generate electricity as more coal-fired power plants under the 10,000 megawatts project would come on stream this year, further reducing PT Perusahaan Listrik Negara (PLN)’s dependency on diesel fuel.

“That’s why what I want to do is determine what volume of coal can be exported and what must be reserved for the domestic market,” Jero said.

He added that the government would soon come up with the calculations of the amount of coal needed by the domestic market in order to determine a domestic quota that had to be met by all coal producers.

If there was a production surplus, he said, the government would not prevent or tax exports.

The government has, since 2010, imposed the so called Domestic Market Obligation (DMO) scheme on 63 coal mining companies in the country. In 2012, the mining companies are obliged to sell 24.72 percent of their output to domestic users under the DMO ruling.

The ministry estimates that this will amount to 82.07 million tons next year, of which around 69.7 percent will go to PLN’s power plants. This figure, however, will not be sufficient as more power plants begin to come on stream.

PLN is the largest coal consumer in Indonesia. In 2012, the company forecasts that it will absorb 54 million tons. With the completion of several new coal-fired power plants, this consumption is expected to soar to 87.5 million tons next year and 95.3 million tons in 2014.

Jero once again insisted that he never agreed to any proposal to apply an export tax on coal and he would have to talk to all coal companies to convince them that such a plan never existed.

He said that the only export tax existing today was a 20 percent tax on raw mineral commodities.

The tax on minerals was first applied to 14 specific commodities, but then the tax was expanded to a further 65 commodities.

The government claims the tax is not aimed at boosting revenues from the mineral mining sector, but to minimize the possibility of over-exploitation in anticipation of the full ban on metal ore exports planned for 2014.

As reported earlier, Trade Minister Gita Wirjawan criticized the idea of an export tax on coal, saying that such a policy could violate the contracts of work (CoW) signed between coal mining companies and the government.

Under the CoW, the amount of taxes and other financial obligations of the companies have been clearly regulated and applying additional taxes could be a breach to the contracts.

Indonesia, the world’s largest thermal coal exporter, produced 275 million tons of coal last year.

This year, the government has set the production target at 332 million tons, while the Indonesian Coal Mining Association (APBI) calculates that the amount might reach 380 million tons

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