High royalty tariff for coal in mine-mouth power plants opposed

Industry experts questioned and opposed the high royalty tariff set by a new government ruling on price formula of coal for mine-mouth power plants.

The Directorate General of Mineral and Coal at the Ministry of Energy and Mineral Resources has recently issued a new decree setting the price formula at production cost plus a 25 percent margin. The decree also provides the production cost assumptions breakdown including a royalty assumption of 20.3 percent.

Ekawahyu Kasih, Secretary General of the Indonesian Coal and Energy Supplier Association (Aspebindo) was quoted by Kontan as questioning how the government comes up with the high royalty tariff considering that existing regulations set coal royalty of IUP coal miners at 3, 5 and 7 percent, depending on the coal quality. Royalty for coal miners holding the PKP2B mining contract is set at a flat rate of 13.5 percent.

Budi Santoso of the Indonesian Mining Experts Association (Perhapi) said that the high royalty tariff for coal dedicated to mine-mouth power plants showed that the government is half-hearted in pushing for the domestic use of coal. He said that the government is more interested in securing greater revenue from the commodity. (*)