Indonesian Coal Producers Criticize Export Duty

Indonesian coal producers criticize export duty

JAKARTA, Oct. 20 (Xinhua) — The recently imposed 5 percent export duty on coal will not yield significant revenues for the Indonesian government and will deter future investments in the sector, an official of coal mine industry said.

While the firms that acquired the first generation contracts to exploit coal could reclaim the export duty, as most contracts stipulate that miners would not be affected by any new duties and taxes, the tariff would also create problems, Indonesian Coal Mining Association chairman Jeffrey Mulyono was quoted Thursday by The Jakarta Post as saying.

“The export duty will only be a source of disputes surrounding the reimbursement process, although (legally) most of our members will not be affected by this policy,” Jeffrey said.

“New investors will be discouraged, seeing how easily regulations can change here,” he added.

The Ministry of Finance issued a decree on Oct. 11, stipulating that all coal exports would be charged a 5 percent duty based on free-on-board prices. The decree is effective immediately.

The country exports some 70 percent of its coal — mostly thermal coal used to generate power — to Japan, South Korea, India and China. This year’s production is predicted to reach 155 million tons, and with the current high prices, the association has estimated next year’s total will rise 12 percent to 175 million.

Jeffrey said that if concerns about domestic supplies were the reason for the export duty, the government could apply a domestic market obligation, as was proposed by the association in July.

“If coal prices abroad are good, contractors will still export the goods, export duty or not,” he said.

The domestic market needs only 30 percent of the country’s coal production so far.