As per Indonesian ministry of energy and mines, the new regulation would help prevent mining companies from evading royalty payments.
Major Indonesian coal companies currently pay a 13.5% coal royalty, while small and mid-sized producers pay 3-7%. However, there is a proposal to impose a uniform coal royalty of 13.5%.
On July 4 '13,the energy ministry's Directorate General of Minerals and Coal issued a notice related to “optimizing of non-tax state revenue. One stipulation in the circular was a requirement for minerals and coal mining companies to pay royalties before transporting their cargoes. Previously, mining companies could pay royalties up to a month after shipment or transport.
Indonesian coal shippers are concerned about a new Indonesian regulation requiring them to pay mining royalties up front before shipping their cargoes, which could hamper their cash flows.
The major adverse effect of this regulation will be on the working capital requirements of coal producers, particularly on small and medium-sized producers, which possess so-called IUP mining licenses. It will help under-capitalized coal producers to acquire larger companies.
Small mining companies, exporting in the spot market, this would result in another struggle and might be a possible cause of delay in the shipment – an additional risk on the part of the buyer.
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