Indonesia formally expresses concern over Japan's planned coal tax

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Thursday that Indonesia had formally expressed concern over the Japan government's plan to impose the so called environmental tax on the country's coal imports.

"I have met with Minister of Economy, Trading and Industry (METI) Takeo Hiranuma on Wednesday to expressed concern that such tax might hurt Indonesian coal export to Japan. The minister seemed to take my grievances well and saying that the decision to impose tax on coal is not yet final as it would be further deliberated in the Diet (parliament)," said Purnomo from Ho Chi Minh city in a phone interview. Purnomo was visiting Japan as part of president Megawati entourage on her visits to Bangladesh, Mongolia, Japan and Vietnam.

Japan plans to impose tax on coal starting October this year with initial rate of $2 per ton, ramping up to $6 per ton in 2007. The proposed tax measure is part of an effort to overhaul the government's Special Energy Account, which funds the development of clean energies and energy-related infrastructure, as well as for reducing greenhouse gas emissions.

Indonesian Coal Mining Association (ICMA) had been complaining that the flat tax imposed regardless of coal quality would hurt Indonesian coal more compared to Australian or Chinese coal as Indonesian coal are mostly of lower calorific value. ICMA called the government to lobby Japan government to impose coal tax based on calorific value, which means lower calorific value coal be taxed less.

Japan imports some 20 million tons of Indonesian coal annually.(godang)