Govt plans incentives for coal mining activities

JAKARTA (JP): The Ministry of Mines and Energy plans to provide new incentives to encourage the development of low quality coal in remote areas.

Director General of Mines Rozik Boedioro Soetjipto said on Tuesday the planned incentives would include the introduction of lower royalties for coal mining activities.

He said mining companies had complained that the current royalty payment imposed by the government was prohibitively high and prevented them from developing low quality coal in remote areas.

"The planned royalty scheme is expected to give opportunities to coal mining companies to gain enough profit from the development of this kind of coal amid the slump in coal prices," Rozik said on the sidelines of the shareholders meeting of publicly listed state mining company PT Aneka Tambang.

Under their contracts, coal mining companies are currently obliged to hand over 13.5 percent of their coal output in royalties to the government.

Industry sources said coal prices had fallen to about US$25 per ton for high quality coal in regional markets due to the economic crisis which hit the region in mid-1997, as against $40 per ton prior to the crisis.

Low quality coal is currently sold at between $10 and $20 per ton.

Rozik said the study made by the Agency for the Assessment and Application of Technology indicated that developing low quality coal in remote areas was currently unprofitable.

The agency, together with a foreign coal expert has drafted a new royalty scheme to benefit companies processing low quality coal.

Rozik said he would present the plan to Minister of Mines and Energy Kuntoro Mangkusubroto and Minister of Finance Bambang Subianto for approval in the near future.

"Under the new scheme, the royalty amount payable by mining companies to the government will vary depending on the quality of the coal and remoteness of the area.

"The royalty scheme will also be dynamic as the amount of royalties will be changing in tune with changes in coal prices," Rozik said.

The new royalty scheme may reduce the government's royalty earnings in the beginning, but royalties are expected to rise as mining firms increase their production of low quality coal. (jsk)