Minister questions rationality of coal export tax

JAKARTA. Trade Minister Gita Wirjawan has joined other stakeholders in criticizing the government’s plan to regulate coal exports through new quotas and additional taxes.

Speaking to reporters in Jakarta on Wednesday, Gita questioned the government’s rationale for implementing export taxes, saying it would violate existing contracts of work (CoW) between big mining companies and the government.

“Rationally speaking, we have signed working contracts with coal mining companies and according to that, they have to pay 45 percent in royalties and taxes,” Gita said.

Imposing a greater fiscal burden on coal mining companies could only be justified if the government had a strong argument, Gita added.

“For example, if our domestic need for coal is around 90 kilograms, while companies managed to produce 100 kilograms, then I do not see any strong reason to impose a tax on them if they want to export the extra 10 kilograms,” Gita said. “It is crucial for the government to have a clear philosophy and reasoning for its policies.”

Earlier this week, Energy and Mineral Resources Minister Jero Wacik confirmed statements by ministry officials on a plan to regulate coal exports to secure domestic supplies.

However, Jero did not specify if the government would impose an additional export tax or a quota system on top of the domestic market obligation (DMO) system that has been in force since 2010.

Jero said that the policy was needed to ensure domestic supplies so the government could implement an energy mix and reduce dependency on diesel and gasoline fuels.

The Energy and Mineral Resources Ministry, Trade Ministry and Finance Ministry previously issued a joint regulation imposing a 20 percent export tax on 65 raw mineral commodities, including coal.

The ministries said that the policy was necessary to encourage domestic processing in advance of a full ban on raw mineral exports, including coal exports, in 2014.

Contacted separately, Komaidi Notonegoro, an energy expert from ReforMiner institute, said that the production capacity of the nation’s coal industry was more than sufficient to supply domestic consumption — as long as the DMO was put in place.

Based on government data, Indonesia’s coal production topped 371 million tons last year, up 34.4 percent over 2010.

The domestic market absorbed 25 percent of the nation’s total annual coal production, according to
Komaidi.

“It seems that the policy plan has been driven by the need to finalize the state budget. The government is struggling to implement the DMO. The government is lacking resources to implement it, and no penalties have so far been given to violators,” Komaidi told The Jakarta Post
recently.

An audit by the Supreme Audit Agency (BPK) accused the Energy and Mineral Resources Ministry of failing to issue decrees that to create a mechanism to supervise and sanction coal miners, as it was mandated to do under the 2009 Minerals and Coal Law.

Meanwhile, the chairman of the Indonesian Chambers of Commerce and Industry (Kadin), Suryo B. Sulisto, said the plan to limit coal exports came at an inauspicious time, considering the nation’s weakening exports due to dwindling global demand.

The Central Statistics Agency (BPS) revealed last week that the nation suffered a trade deficit of US$641.1 million in April after recording a surplus of $920 million in January, $692.8 million in February and $840 million in March.

“This policy will seriously affect Indonesia’s export performance. Indonesia has just achieved positive status in the eyes of foreign investors. The government should not move in that direction,” he said.

Suryo, who is also a commissioner for coal producer PT Bumi Resources, said that the government had not consulted with stakeholders in the coal industry regarding its plan.

Satya W. Yudha of the Golkar Party told the Post that the government’s motive in implementing the coal export tax was to raise revenue to plug its budget deficit from soaring fuel subsidies, which had partly stemmed from the government’s failure to implement its energy mix programs as scheduled.

On the other hand, Satya said, the policy of an export quota would be hard to implement, as shown by the DMO program.

“The government cannot solve illegal exports. China has explicitly said that we enjoy a trade surplus, but our statistics show otherwise. This is because exporters falsified reports.” (Hans David Tampubolon and Linda Yulisman/ The Jakarta Post)