Govt plans to tax coal and gas to curtail export

Govt plans to tax coal and gas to curtail export

Rendi A. Witular, The Jakarta Post, Jakarta

The government is considering applying fiscal and non-fiscal
measures to secure a supply of gas and coal for the domestic
market as part of the country's efforts to reduce its dependency
on oil as the main source of energy.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said the government was studying the possibility of imposing
fiscal barriers for coal and gas, which would include attempts to
impose high export tariffs on the products, or provide tax
incentives for suppliers willing to sell their products on the
domestic market.

"During a limited Cabinet meeting, the government agreed to
take fiscal measure to discourage coal and gas suppliers from
exporting their products, and persuade them instead to sell them
on the domestic market," he said on Tuesday at the State Palace.

Purnomo, however, said the plan to impose an export tax for
gas would have no impact on existing contracts between the
government and several global gas buyers.

The fiscal measures for gas and coal would be taken to help
reduce the country's dependency on oil amid declining reserves
and output, in addition to the current high prices on the global
market.

Indonesia's crude oil net exports dropped to 30,000 barrel per
day (bpd) in 2004 compared to 100,000 bpd in 2003.

The Central Statistics Agency (BPS) said oil and gas imports
-- including both crude oil and oil products -- increased sharply
by 52.36 percent in 2004.

The increase was due to declining oil output from the
country's aging oil fields and rising domestic demand of up to 7
percent per year.

The government is planning to gradually cut the use of oil to
30 percent of the country's total energy use in 2025, with the
use of gas and coal to make up the remaining 60 percent while
another 10 percent for other energy.

At present, 60 percent of the country's energy comes from oil.

Purnomo, however, said the decision to impose the fiscal
barriers would be made after the Ministry of Trade completed its
legal study of the plan to avoid violating trade regulations set
out by the World Trade Organization (WTO).

"The plan is still subject to a legal study. We fear that if
we rush to impose an export tax, we could end up violating the
WTO rules," he said.

Aside from the fiscal barriers, the government will also
provide incentives for gas producers in building new plants and
transmission infrastructure in the country, in order to fully
develop the untapped resources.

Purnomo, however, refused to elaborate on the incentives.

At present, Indonesia has a gas reserve of up to 60 years,
while coal is estimated to have a reserve of 150 years.

Elsewhere, Purnomo said the government was planning to include
costs for managing the environment by gas and coal companies into
the production costs, in order to ease the financial burden of
the companies, while, at the same time, ensuring environmentally
friendly management.