Govt to increase coal royalty to 13% next year

The Energy and Mineral Resources Minister has approved the recomendation from the Finance Ministry to increase the royalty of coal produced by mining companies which hold IUP mining permits to 13 percent from between 3 percent and 7 percent at present, Kontan reported on Wednesday.

Deputy Minister of Energy and Mineral Resources Susilo Siswoutomo said in Jakarta on Tuesday that the new royalty rate would be implemented beginning next year because this year many coal miners were still facing financial difficulties due to the sharp drop in coal prices.

"The plan to increase coal royalty will not be carried out this year, as the coal prices are still too low,? he said after a hearing with the Commission XI of the House of Representatives (DPR) on Tuesday.

The increase in the royalty is projected to boost state revenues from royalty payment by Rp 4 trillion beginning 2014. The increase in royalty will affect only miners which hold IUP permits. The coal mining companies which hold PKP2B perimits will continue to pay royalty at the current rate.

At present, coal miners holding mine concessions or mining permits issued by the central government (PKP2B) are required to pay royalty of 13.5 percent of sales, while coal miners holding mining permits issued by the local government (IUPs) are required to pay royalty between 3.5 and 7 percent. Miners with IUP permits consists mostly of small and medium-scale mines.

The Energy and Mineral Resources will need to revise the government?s regulation No. 9, 2012 on government?s non tax revenues in order to be able to implement the new royalty rate for IUP holders. (*)