Govt plans incentives for coal mining activities

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)