The Indonesian Ministry of Energy and Mineral Resources (MEMR) has proposed a number of incentives to be given to mining companies to support the industry in dealing with the impact of the Covid-19 pandemic. While miners were generally operating normally during the first quarter 2020, they fear negative impact of the pandemic to materialize in the second quarter of this year.
Bambang Gatot Ariyono, director general of mineral and coal at the ministry, said recently that the ministry has proposed some incentives for miners to help sustain their cashflow during the pandemic.
“Regarding incentives to sustain the cashflow, we propose that the Ministry of Finance Regulation No. 23/2020 to include the mining sector and its supporting industries into the list of beneficiaries”, Bambang said in a webinar with miners.
Ministry of Finance Regulation No 23/2020 provides tax incentives for taxpayers who are impacted by Covid-19 pandemic. Bambang stated that the proposed incentives for miners include exemption of the PPh 22 import and value-added tax for specific product, and reduction of PPh 21 for employees who earn salary less than Rp200 million (or USD 12,656) per year. Not only fiscal incentive, but MEMR also wants a guaranteed supply of fuels and other logistics for miners to support the mining activities. Based on Ministry of Health Regulation No 9/2020 regarding Wide Scale Social Distancing, mining industry is allowed to continue to operate amid the Covid-19 pandemic.
Bambang also proposes for the postponement of the Ministry of Trade Regulation No 82/2017 regarding the obligation to utilize national vessels in coal and crude palm oil (CPO) exports. The regulation was scheduled to be implemented starting from May 1, 2020. In addition, Bambang also said that MEMR proposes to allow mining companies to use foreign exchange currency instead of the rupiah for transaction.
“All these incentives have been proposed and will be decided by the government at a coordination meeting”, Bambang said.
Based on MEMR data, the country’s coal production in the first quarter of 2020 was 141 million tons (MnT), compared to full-year target of 550 MnT.
Ido Hutabarat, President Director of coal firm PT Arutmin Indonesia, and Pandu Sjahrir, Chairman of Indonesia Coal Mining Association (ICMA), confirmed that the operation production in the first quarter ran normally.
“However, a slowdown in demand will occur in the second quarter for both minerals and coal. India decided to lockdown and only few companies can discharge coal to India. China starts recovering, but the coal import demand is still weak”, Ido said.
Pandu Sjahrir, Chairman ICMA, added that there are some coal shipments that have been put on hold for next few months. Not only India, but coal demand from other export markets, such as South Korea, Japan and the Philippine will also drop.
“We have information from our foreign buyers that there is a tendency that the coal demand after the second quarter will drop quite significantly”, Pandu said.
Meanwhile, Tony Wenas, President Director of PT Freeport Indonesia, said the impact to available manpower will occur starting May and June.
“By implementing isolation, we hold the roster of existing manpower at the jobsites much longer”, he said.
Tony also highlighted the impact of Covid-19 pandemic to the progress of smelter projects which may be greatly impacted.
“The progress of the projects will be hampered because the countries of origin of the foreign experts are infected by Covid-19 as well”, he said.
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