Coal body says forced local sales better than taxes

Leony Aurora, The Jakarta Post, Jakarta

The Association of Indonesian Coal Producers has called on the government to drop plans to impose export taxes on coal and instead to apply a "domestic market obligation" to ensure enough supply of coal.

The association's chairman Jeffry Mulyono said that if international prices were high, export taxes would not only prevent producers from selling coal abroad. The measure, he said, would also encourage smuggling.

"It's better to apply a domestic market obligation, requiring coal producers to sell let's say at 30 percent to the domestic market to secure supply," said Jeffry, adding that the association had submitted a proposal on the matter to the Ministry of Energy and Mineral Resources.

Prices, however, should be left to businesses to decide and not be regulated by the government, he warned.

According to previous media reports, the Ministry of Trade is currently studying the possibility of applying export taxes on coal. The outcome of the study has not been released.

Indonesia produced some 131 million tons of coal last year, of which 36 million tons, or 28 percent, was used by local consumers, mostly comprising of power plants, pulp, steel and cement companies.

About 70 percent of total production is exported to Japan, Taiwan, South Korea, India and China, the biggest coal consumer in the world.

Amid rising global coal prices, it is forecast that coal output in the country will increase by 19 percent and reach 155 million tons this year.

The association has estimated that within 20 years, domestic demand for coal will increase more than five fold to 194 million tons per year as the commodity replaces the heavily-subsidized fuel.

"The government has to program the yearly increase in production to reach such an output," said Jeffry.

In a road map drafted by the energy ministry, coal usage is targeted to rise from 11 percent of the total fuel used to produce energy at present to 38 percent in 2020.