Duties for mining equipment scrapped

Fabiola Desy Unidjaja, The Jakarta Post, Jakarta

The government is providing tax free facilities to oil and gas companies that import upstream mining equipment as well as oil products in a bid to reduce production costs in the industry.

Regulations on the move were signed last week by Minister of Finance Yusuf Anwar.

"Tax free facilities are specified for 63 items, including drilling tools, drilling equipment and other heavy equipment in the upstream industry," the Ministry of Energy and Mineral Resources' Director General for Oil and Gas Iin Arifin Takhyan said on Tuesday.

Ministerial Decree No. 06/pmk 010/2005 signed on Jan. 28 stipulates that the tax-free facility will be applied for 18 months until July 15, 2006, and carries a retroactive principle for all purchases made since July 16, 2002.

Decree No. 07/pmk/2005, signed on Jan. 18, stipulates that the government has also scrapped import duty on oil products such as leaded and unleaded premium fuel for all industries.

In the decrees, the government will also cut the time needed to get a value-added tax rebate on exploration and production equipment from 180 days to 120 days.

"This decision was made because the government is still subsidizing fuel and we need to have more companies to use drilling equipment, meaning that they will boost the upstream industry," Iin said.

The government has been trying hard to boost the energy industry and attract more investors due to the 5 percent per year declining oil production over the past decade.

Indonesia is the largest oil producer in Southeast Asia but continues to import crude oil to fulfill increasing domestic demand.

Iin further said that revision of decrees took time as it required approval from the House of Representatives.

"We are also considering scrapping several taxes imposed on the mining industry during the exploration stage," he said, without elaborating.