Indonesian coal miners have approached the country’s ministry of energy and mineral resources to provide relaxation for the coal business because it was affected during the Covid-19 pandemic.
The Executive Director of the Indonesian Coal Mining Association (ICMA) Hendra Sinadia said, they asked for relief of royalties and the obligation to supply cheap coal for the Domestic Market Obligation (DMO). He hopes that relief can be given until the end of this year.
Hendra said that currently the coal business is under pressure along with the decline in demand from export and domestic markets. As a result, the trend of coal prices has declined in recent months, which is expected to last this year. This condition makes it difficult for many companies to manage cash flow and must strive to survive, while still fulfilling various obligations, such as tax and finance, environmental management, reclamation, and social obligations
“Also as far as possible there is no termination of employment for employees. While the price projections from the four indexes forming the HBA (Indonesian thermal coal benchmark price) are still worrying and do not reflect actual real market prices”, said Hendra.
As a result, business actors in paying the obligation of Non-Tax State Revenue (PNBP) production fees or royalties are forced to pay the difference from the Coal Benchmark Price (HPB) which is above the Free on Board (FoB) selling price. Therefore, ICMA submitted an application for temporary changes to the procedure for paying coal royalties during this pandemic. Hendra said, his party suggested that some of the provisions in the Minister of Energy and Mineral Resources Decree Number 1823 K30/MEM/2018 be revised.
ICMA proposes, the formula can be changed temporarily by using the actual selling price, which generally uses index-linked, not with the current system that uses HPB. “Because of the downward trend in coal prices due to oversupply, business operators bear a heavy financial burden because HPB is higher than the actual selling price”, Hendra said.
As for the payment, ICMA also requests that it be done at least 30 days after the coal commodity is above the transportation mode.
In addition to paying royalties, ICMA also requested relaxation in terms of meeting the DMO. They requested that sanctions in the form of fines for those who did not meet the DMO could be lifted temporarily. If not, then the percentage of DMO liabilities by 25% can be reduced to 18%. Hendra reasoned, the current market conditions and domestic needs have changed. ICMA estimates, domestic coal demand will only touch around 100 million tons (MnT), or lower than the target set by the government this year, which is 155 MnT.
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