Indonesia suffers a loss of 5 trillion rupiah from illegal coal mining.
Indonesia, country with one of the vast coal reserves of about 5.5 billion MT, projected to last for another 26 years according to the current rate of consumption, is under alert. These projections do not take illegal mining into account. The country is suffering as the total illegal mining stands to around 56 MnT that translates to an estimated loss of about 3.4 trillion rupiah (RM 1 billion) to 5.5 trillion rupiah (RM 1.6 billion). It is worth noticing that Indonesia has been ranked no. 4 for the total coal production (410 MnT for FY13) in the world but with the consumption and the exports these reserves might not stand for long.
FDI on coal mining in Indonesia came in effect since 1990 and since then the coal production from numerous small regions of the country skyrocketed. Below is the graph that shows the production of Coal in MnT over the past 20 years.
Indonesian coal productionIndonesia have around two decades to run out of coal, as estimated by government bodies however, these figures does not consider illegal mining that makes up 13% of overall production. It might just exhaust before if the illegal mining is not checked. So far, the country has suffered a net loss of 5 trillion rupiah (RM 1.5 billion) from illegal mining because non-payment of taxes and royalties to state.
The government in Indonesia is considering imposing coal export duties from FY14 with an aim to boost royalties and conserve the non-renewable fossil fuels. With the existing situation where miners are already facing trouble with the declining prices and falling global demand, the counter effect of this strict policy may go south, further boosting illegal operations in the country.
As per the current proposal there will be a 10% royalty on coal below 5.1 thousand Kcal/kg and 12% – 13% on coal between 5.1-6.1 thousand kcal/kg. Although demand for Indonesian coal is very high in international market, the country might as well suffer loss due to the increased coal price. Miners argues to the current proposed regulations and
Perhaps, government might play an active role in controlling the illegal mining in Indonesia and apply the tariffs based on a given price index to come over the situation. They can further boost the sentiments of traders by adding incentives to coal companies to support national energy security.
Indonesian Mining Expert Association advisor Mr. Irwandi Arif said “referring to law no. 17, year 2006 on customs, the application of export duty was not right solution to increase state revenue. This would jack up production cost undermining the nation’s competitive edge. The application of export duty should be aiming at protecting domestic markets.”
Director General of Mineral and Coal, Thamrin Sihite said, he would consider the miner’s aspiration. However, he cannot guarantee the government would annul the regulation. “We will consider this as input to be discussed among related ministries,” he said.