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Govt Set to Increase Coal Output Target This Year

The Energy and Mineral Resources Ministry is planning to increase its coal output target this year as the government seeks to offset the ongoing decline in the commodity’s price.

Bambang Tjahjono, the director for coal at the Ministry’s directorate general for mineral and coal, said an increase in the output target would take this year’s production to 455 million tons, or close to last year’s output of 458 million tons.

The mineral and coal office initially targeted for coal output to reach only 425 million tons this year.

From last year’s total output of 458 million tons, the mineral and coal office managed to collect Rp 35.4 trillion in royalties from the holders of mineral and coal mining permits and contracts of work.

Under the revised state budget, the government is aiming to collect Rp 52.5 trillion from the mineral and coal sector this year. Relying only on royalty payments, which will be set at 7 percent for low-calorie coal, 9 percent for the medium-calorie type and 13.5 percent for high-calorie coal, will be unlikely to help the mineral and coal office meet the revenue target.

There’s one proposal to demand 13.5 percent in royalties across all the coal types. Given the ongoing decrease in coal prices, however, the government was confident that any increase would impact badly on producers, according to R. Sukhyar, the director general for mineral and coal.

There had been a proposal to increase the level of royalty payments from the range of 7 to 13.5 percent, an increase from the 3 percent, 5 percent and 7 percent levels as stipulated in a 2012 regulation.

However, the plan was rejected by industry players who claimed that the royalty level would be too burdensome to their businesses, which have been under pressure because of the decline in coal prices.

The Indonesian coal price reference (HBA), was set at US$62.92 per ton in February, lower than the $63.84 per ton set a month earlier.

“This is the hardest one. The solution, beside increasing production volumes and royalty payments, is to collect late payments from producers that have not been collected,” Bambang said.

The mineral and coal office has been working with the Corruption Eradication Commission (KPK) to ensure that all mining companies have carried out their obligations to the state, including paying their royalties. Last year, the KPK found that numerous miners have not paid their royalties.

The pressures on coal prices are expected to continue particularly because of slowing demand from China, a major consumer of coal.