Arutmin withholds $50 million in coal royalty

Leony Aurora, The Jakarta Post, Jakarta

Local coal producer PT Arutmin Indonesia is withholding some US$50 million in royalties from its coal output, saying the government has not yet provided protection against unconventional mining practices.

The company stalled the payment from 2004 and the first quarter of this year, Arutmin's operation director Endang Ruchiat said in a hearing with House of Representatives Commission VII, overseeing mining and energy, on Wednesday.

"We will pay (at least) half of the payment this year," he said.

The company said the government should protect the mines from illegal miners, who used heavy equipment and were organized.

"We have to pay royalty, but we also demand our right to be protected," said Endang.

Ministry of Energy and Mineral Resources director general of geology and mineral resources Simon Sembiring confirmed that there had been a delay in the payment of royalties.

According to Simon, Arutmin withheld the payment as the government owed them value-added taxes, which should have been returned. He did not elaborate.

"Arutmin will pay it in installments. We have already a schedule for that," he said.

In its conclusion, Commission VII urged Arutmin to settle the debt immediately and disclose the payment scheme within a week. The scheme is needed to ensure that the House has all the necessary data to draft the state budget, the legislators further said in the session's conclusion.

Arutmin, a subsidiary of the country's largest coal producer PT Bumi Resources, operates open pit mines in Senakin and Satui, South Kalimantan.

Last year, it produced 15 million tons of coal. Arutmin aims to raise output to 18 million tons this year. The government gets 13.5 percent from coal sales as royalty.

Arutmin's reserves increased by 31.6 percent in March this year to 375 million tons as compared to 285 million tons of reserves recorded in June last year.

Bumi's finance director Eddie Soebari said the increased reserves were due to rising global coal prices, which made deeper mining economically viable.