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Indonesia Plans to Raise Coal Royalties by End of First Quarter

(Bloomberg) — Indonesia plans to raise coal royalties by the end of the first quarter to boost mining revenue amid shrinking¬† incomes from oil and gas, according to an official at the Energy and Mineral Resources ministry.

Parliament has asked the government to increase non-tax revenue from coal and metals mining to 52.2 trillion rupiah ($4.1 billion) this year from 35 trillion rupiah in 2014, Sujatmiko, the ministry’s director of mineral and coal program supervision, said in an interview Thursday in Jakarta. It will be the first change in coal royalties in three years.

“We’re revising a 2012 regulation on mining-royalty tariffs,” said Sujatmiko, who goes by one name. “We target to impose new tariffs not later than April so that there will be plenty of time to meet higher revenue target.”

A royalty increase would add to costs for miners amid declining coal prices and weak demand for the power-station fuel. Indonesia this week cut its benchmark price for an eighth month, pegging coal with a gross heating value of 6,322 kilocalories a kilogram at $62.92 a metric ton for February. That’s the lowest level since May 2009.

Coal with less than 5,100 kilocalories heating value on an air-dried basis will be subject to royalties of 7 percent, up from 3 percent currently under the January 2012 regulation, Sujatmiko said. Medium grade cargoes of 5,100 to 6,100 kilocalories will pay 9 percent, up from 5 percent. High-quality shipments of more than 6,100 kilocalories will pay 13.5 percent, up from 7 percent, he said.

Coal Output

The new rates will apply to companies holding a Mining Business License, known as IUP, which accounts for 25 percent of Indonesia’s total coal production forecast at 425 million tons this year, according to Sujatmiko. Miners with so-called contracts of works pay a fixed 13.5 percent royalty. These include PT Kaltim Prima Coal, a unit of PT Bumi Resources, Indonesia’s largest coal miner, and PT Adaro Indonesia, a unit of PT Adaro Energy.

The government will also push for construction of new metal smelters to obtain more revenue from metal exports, Sujatmiko
said. One lead smelter and 11 nickel smelters will start construction this year, he said.

Coal accounts for about 80 percent of Indonesia’s mining revenue, Sujatmiko said. Oil and gas sales income is estimated at between $6.6 billion and $14.9 billion this year, down from $28 billion in 2014, Amien Sunaryadi, the head of SKK Migas, the upstream oil and gas regulator, said on Jan. 19.