Coal export duty hurting investment: Association

Coal export duty hurting investment: Association

Leony Aurora, The Jakarta Post, Jakarta

The recently imposed 5 percent export duty on coal will not yield
significant revenues for the government and will deter future
investments in the sector, coal miners and a government official
say.

While the firms that acquired the first generation contracts
to exploit coal could reclaim the export duty, as most contracts
stipulate that miners would not be affected by any new duties and
taxes, the tariff would also create problems, Indonesian Coal
Mining Association chairman Jeffrey Mulyono said on Wednesday.

"The export duty will only be a source of disputes surrounding
the reimbursement process, although (legally) most of our members
will not be affected by this policy," Jeffrey said.

"New investors will be discouraged, seeing how easily
regulations can change here," he added.

The Ministry of Finance issued a decree on Oct. 11,
stipulating that all coal exports would be charged a 5 percent
duty based on free-on-board prices. The decree is effective
immediately.

Jeffrey said neither the association nor Berau Coal, the
company he led, had received a copy of the decree.

The new export duty requires the Ministry of Trade to create a
collection mechanism. Trade minister Mari Pangestu has reportedly
said her department would coordinate with the Ministry of Energy
and Mineral Resources over the matter.

However, the energy ministry's director general of geology and
mineral resources, Simon Sembiring, said that there had not been
any communication between the two departments. "I don't know if
the respective ministers have discussed this," Simon said.

"We had already stated that we oppose such an export duty in a
previous meeting with the finance ministry."

The policy would bring some Rp 300 billion (US$30 million)
into state coffers. It would also lead to discrimination between
first generation contractors and smaller ones to whom the duty is
applicable, as well as between coal producers and other miners,
Simon said.

"The (negative) consequence is bigger than the revenue to be
received," he added.

The country exports some 70 percent of its coal -- mostly
thermal coal used to generate power -- to Japan, Taiwan, South
Korea, India and China. This year's production is predicted to
reach 155 million tons, and with the current high prices, the
association has estimated next year's total will rise 12 percent
to 175 million.

Jeffrey said that if concerns about domestic supplies were the
reason for the export duty, the government could apply a domestic
market obligation, as was proposed by the association in July.

"If coal prices abroad are good, contractors will still export
the goods, export duty or not," he said.

Simon said the domestic market needed only 30 percent of the
country's coal production. "There's no lack of supply. The demand
is only so high here," he said.

In a plan 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.