Indonesian coal miners have voiced concerns over the government’s decision to go ahead with implementing a regulation of requiring companies to use national insurance firms for coal and palm oil exports by 1 Feb’19 after the rule had been postponed for nearly six months.
In 2017, the Trade Ministry introduced the regulation, which makes it mandatory for companies to use national vessels and domestic insurance companies for exports of coal and palm oil as well as for imports of rice.
Initially, the rule had been scheduled to kick off in May 2018. Later on, the government decided to allow companies to use foreign vessels until May 2020 and postponed the rule to use national insurance until February 2019.
With the deadline approaching, the local media this week reported that the Trade Ministry won’t give another extension and the rule will be effective as planned on 1 Feb’ 19.
The move came despite a request from miners to postpone it again due to lack of a technical guideline and a fixed list of insurers providing marine cargo services from the Indonesia’s Financial Services Authority (OJK).
In addition, lacking simulations on the rule also have the potential to disrupt exports from one of the world’s top thermal coal exporters, said the Indonesian Coal Mining Association (ICMA) in said a statement, adding it sent the letter to request postponement on 14 Dec’18.
“Amid the uncertainties and in the absence of technical guideline, ICMA concerns that the implementation of the Trade Minister’s Regulation 80/2018 can cause problems, which potentially can disrupt exports,” ICMA said.
With the downturn in coal prices, the regulation could add pressure to the exporters, it added.
Most Indonesian coal cargoes are shipped overseas on a free-on-board basis, which let buyers to arrange for vessels and insurance. By requiring Indonesian miners to use domestic insurers, they must negotiate with buyers to change the contract into CIF basis.
Despite the miners’ request, the ministry has only issued the guideline on Jan. 16 and held briefings for companies to explain the guideline on Jan. 22, said Hendra Sinadia, ICMA’s executive director by phone on late Thursday, Jan. 24.
“Logically, it’s impossible. How can exporters find domestic insurers in such a short time. Moreover, the coal isn’t ours once it’s loaded into the mother vessel. The coal becomes the buyer’s responsibility,” Sinadia said.
At least, there should be a transition period, he added.
The government, however, is adamant to its stance.
“We have given extensions. So it will still be effective on February 1. Both exporters and importers must use Indonesian insurance companies,” said Oke Nurwan, the ministry’s director general of foreign trade as quoted by a news website, Katadata, on Jan. 23. Failing to comply will result in an export ban, Nurwan added.
ICMA has warned that any disruptions on exports of the power-station fuel could have an adverse impact amid the country’s widening trade deficit.
Coal is one of Indonesia’s main non-oil-and-gas exports. Indonesia’s coal exports rose by 10.54% to 392.37 MnT in January to November 2018, from 354.96 MnT in the same period in 2017, according to the government data.
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