At least 20 million tons of coal have been produced and exported illegally every year since the beginning of 2005, the government says.
Simon Sembiring, director general of coal, mineral and geothermal energy at the Energy and Mineral Resources Ministry, said Thursday mushrooming illegal mining practices that started three years ago had led to the illegal exports.
He said most of the illegally shipped coal came from mines run under illegitimate permits issued by local governments that did not file permit requests for approval from central authorities.
With the price of coal currently hovering around US$100 a ton, the government could potentially lose about $270 million revenue from taxes and royalties each year.
Coal mining companies must pay royalties and taxes of 13.5 percent from their total production to the government.
Simon said recently the government's coal production target this year was about 225 million tons, a 4 percent increase from last year's 215 million tons.
Government guidelines have set an export limit of 150 million tons a year from 2009 until 2025, when the operation of new power plants owned by state power firm PLN is expected to set local demand soaring.
"These guidelines are very flexible. If the local demand is not that great, we may consider exporting more coal to increase revenue for the state," Simon said.
Currently, 75 percent of the country's total coal production is being exported.
The Indonesian Coal Producers Association said local producers were increasing production to benefit from higher global demand, especially from China and India.
Simon called on all government offices, including police, local governments and the attorney general and related ministries, to make concerted efforts to stop illegal mining practices.
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