Royalty rate imposed on coal mining companies need revision

The current 13.5 percent royalty imposed on coal mining companies should be changed in a bid to further encourage the companies to expand their exploration activities in an underground mining site, Director General for Geology and Development of Mineral Resources Wimpy S. Tjetjep said as reported by Bisnis Indonesia on Tuesday.

"The royalty policy related on coal production should be changed so that mining companies will pay different rates of royalties depending on the nature and the difficulty level of the mining sites they operate," he was quoted as saying.

According to him the current royalty policy has discouraged coal producers to explore and produce coal in deep underground mining areas because the royalty they have to pay is still too expensive for such mining locations.

He said that the country?s coal production was only about 10 percent of the actual coal potency because most coal mining companies were still reluctant to carry out production activities in more expansive exploration activities in the underground mining area.

According to Simon F. Sembiring, the head of the Research and Development at the Ministry of Energy and Mineral Resources, the 13.5 percent royalty which is now the form of cash should be paid in the form of coal.

"The coal can be then used as a buffer stock. The establishment of the national coal buffer stock can be used to control the sharp fluctuation in coal prices, as well as to main adequate supply to local companies particularly electricity plants," he said. (*)