MEMR seeks to drop PBB tax in geothermal projects

The Ministry of Energy and Mineral Resources (MEMR) has proposed to the Ministry of Finance to drop the so-called land and building tax (better known under its Bahasa acronym of PBB) in geothermal exploration projects in a bid to help lure badly needed investment into the sector, Koran Tempo reported on Wednesday.

?The (tax) incentive is needed because geothermal investment is expensive and high risk,? said Director of Geothermal at the ministry, Yunus Saefulhak on Tuesday.

Yunus said that geothermal exploration project currently is subject to the PBB tax at a stage where there?s no guarantee yet for the investors to find the geothermal resources. As result, contractors face difficulties in obtaining bank loans as many banks consider the projects to have low economic viability.

He added that more investment into the geothermal sector is urgent as the contribution of geothermal in the country?s power plant development over the next five years is quite high at 4.60 MW. Unfortunately, not many investors are interested in investing into the geothermal sector due to the huge investment requirement.

To help meet the target, the MEMR plans to offer to investors 27 geothermal working areas gradually until 2020. This year, four working areas have been put on tender.

The paper said that the ministry also plans a number of incentives to complement previous ones in a bid to help lure new investment into the geothermal sector including better feed-in-tariff.(*)