Indonesia, one of the world’s largest thermal coal exporters, plans to increase royalties imposed on mining companies, which operate under IUP permits, to 13.5 percent of net sales in 2014 from the current rate of 5 to 7 percent.
The Indonesian government may increase the royalty rate in a bid to increase state revenue from the coal mining sector.
They are planning to increase the royalties paid by coal miners holding the IUP licenses, as the current revenue from royalty payments was not as big as the coal the country has produced.
IUP licenses issued by local governments after the introduction of the 2009 Mining Law were usually held by smaller or newer miners.
These smaller and newer mining companies paid their royalties based on the calorific value of the coal each of the firms produced  the higher quality of the coal would mean more royalties for the miners.
The royalty rate for coal with calorie contents of less than 5,100 kilocalories per kilogram (kCal/kg), for example, is set at 3 percent of net sales. A royalty rate of 5 percent of net sales is set for coal with a calorific value of between 5,100 kCal/kg and 6,100 kCal/kg while 7 percent is implemented for coal with a calorific value of more than 6,100 kCal/kg.
The coal mining companies holding contracts of work (KK) and PKP2B licenses, which were issued by the central government before the introduction of the 2009 Mining Law, are exempt from the planned royalty increase as they all have already paid a 13.5 percent royalty for the low-rank and high-rank coal they produce.
In 2012, Indonesia produced 386 million tons of thermal coal, up 9 percent from the initial target of 353 million tons or 4 percent higher than the 370 million tons it produced a year earlier, said ministry data.
Despite the higher output, the Indonesian government last year received Rp 20.8 trillion in non-revenue  including royalties  from the mining sector (both coal and minerals), down by 14 percent from the Rp 24.2 trillion of non-tax revenue the government received in 2011.
This year, Indonesia aims to produce 391 million tons of thermal coal and expects to receive Rp 29.9 trillion in non-tax revenue. The country produced 99 million tons of coal in the first three months of this year, according to government data.
Bob Kamandanu, the chairman of the Indonesian Coal Mining Association (ICMA), said the country’s coal mining industry would seek to oppose the move from the government to equate the royalty rate for coal miners to 13.5 percent, citing that “it would hurt the miners, particularly the smaller onesâ€Â.
“We think it would be more reasonable if the government equated the royalty rate rule according to the quality of the coal both miners working under the PKP2B and IUP licenses produce,†he said.
– Sourced
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