Mining firms may pay royalties in coal

Ika Krismantari, The Jakarta Post, Jakarta

The government is considering requiring coal-mining firms to pay royalties in the form of coal, not in cash as is currently the case.

Farida Zed, the secretary at the Energy and Mineral Resources Ministry's directorate general of geology and minerals, said Monday that such a change was needed to ensure a sufficient supply of coal to the increasing number of coal-fired power plants.

Currently, the government receives 13.5 percent of a coal-mining firm's revenues in the form of cash royalties, which include a contribution to the so-called "development fund".

Previously, the government required the firms to pay their royalties in the form of coal taken from their overall coal production. However, the system was changed as it was deemed ineffective due to the fact that the government had to resell the coal in order to get the cash.

Farida said that the demand for coal on the local market had been increasing due to the increasing number of coal-fired power plants coming onstream.

She said that with the increase in the number of coal-fired plants being built under the government's fast-track program for an additional 10,000 megawatts in power supply over the three years up until the end 2009, the domestic demand for coal would further increase in the coming years.

According to figures from the Energy and Mineral Resources Ministry, Indonesia produced 193 million tons of coal last year, of which 145 million tons were earmarked for the export market and 48 million tons for domestic market. This year, Indonesia is expected to produce 196 million tons, of which about 147 million tons will be exported, and the remaining 49 million tons supplied to the domestic market.

By 2009, total production is expected to have increased to 225 million tons. About 150 million tons of that total will be exported, and the remaining 75 million tons sold on the local market.

By 2010, coal production is expected to have further increased to 240 million tons, with about 150 million tons of this being exported and the other 90 million tons supplied to the domestic market.