Duty On Coal Exports Expected To Trigger Illegal Mining

Jakarta, Sept 12 (Antara) - The government`s plan to raise royalties and export duties on coal will likely trigger rampant illegal mining, the Indonesian Coal Mining Association (APBI) warned. "Illegal coal production currently stands at around 56 million tons, with state losses estimated at Rp3.4 trillion-Rp5,5 trillion per year," Chairman of APBI Commercial Committee Pandu Sjahrir said following a discussion on coal royalties and export duties here on Wednesday. He noted that the recent slump in global coal prices is also inseparable from the glut of illegal coal in the global market. According to the association`s research, more than Rp5 trillion was lost last year because illegal coal miners did not pay income tax, value-added tax, and royalties to the state. Although demand for Indonesian coal is very high, Pandu feared that many legitimate coal-mining companies would follow suit. If the government insists on imposing duties on coal exports, the state`s losses may increase even further, he said, adding that the plan to impose such duties ran counter to the law. "Therefore, APBI-ICMA has asked the government to reconsider its plan to raise royalties and impose duties on coal exports," he stated. As an alternative to coal export duties, the government should actively control illegal mining, apply royalty tariffs based on a given price index, and provide incentives to coal companies to support national energy security, he remarked. Meanwhile, the government is considering imposing coal export duties next year to boost royalties and to conserve the non-renewable fossil fuel, the Energy and Mineral Resources Minister`s special staff Tabrani Alwi said here on Tuesday. He noted that the government wanted to control the use of the nation`s natural resources, including coal. "The government is considering imposing export duties on coal following a similar action on (the exports of) minerals," he explained. In accordance with Law No. 4 of 2009 on Minerals and Coal, with effect from Jan. 2014, minerals must be processed at home before being exported. However, the law does not mandate that coal exports be subject to duty. The government has projected that coal royalties from mining business permit (IUP) holders---small- and medium-scale mining companies---will rise by 10-13.5 percent of current selling prices from Jan. 2014 onward. Open pits with coal below 5.1 thousand kcal/kg are expected to account for close to 10 percent of the royalties, while royalties from open pits with 5.1 thousand to 6 thousand kcal/kg coal and less than 6.1 thousand kcal/kg coal are projected to reach 12 percent and 13.5 percent, respectively. Meanwhile, royalties from joint coal-mining contractors (PKP2B) remains fixed at 13.5 percent of the selling price. To increase coal royalties, the government will be forced to revise Regulation No. 9/2012 on the types and tariffs of non-tax state revenues at the Energy and Mineral Resources Ministry. Under the current regulation, coal royalties from open pits have been set at 3-7 percent of the selling price, depending on the calorific value. The tariff of royalties from coal with a calorific value of under 5.1 thousand kcal/kg has been set at 3 percent of the selling price, while those from coal with a calorific value of 5.1 thousand to 6.1 thousand kcal/kg have been set at 5 percent. The tariff of royalties from coal with a calorific value of less than 6.1 thousand kcal/kg has been set at 7 percent.