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Indonesia Puts Royalty Hike on Hold Due to Weak Coal Prices 27-Jul-2015


With coal prices still struggling to recover, the Indonesian government has decided to shelve its plan to demand increased royalty payments from miners, a senior official said on Wednesday.

“The government won’t raise [the royalties] without consideration, but we will monitor the situation. So, we’re putting the plan to increase coal royalties on hold,” said Bambang Gatot, the director general for mineral resources and coal at the Energy and Mineral Resources Ministry.

Back in March, the ministry revealed that it was considering to increase royalties for coal miners in the country in hopes of increasing non-tax revenue from coal and metals.

The new rate was originally slated to be imposed from April 1 but repeatedly delayed, amid concern that rising royalty costs would lead to job losses and encourage illegal mining. Last month, the government it would impose the new scheme in September.

Bambang said that the ministry had already determined the size of the royalty hike for high-calorie and middle-calorie coal, but that the plans had not yet been sent to the Finance Ministry. He didn’t disclose any further details.

Commodity prices globally, including coal, have been trading at their lowest levels since 2009. The coal reference price in Indonesia was set at $59.19 per ton for July 2015 by the Energy Ministry, which is a 0.67 percent decline from June, when it stood at $59.59 per ton.

The ministry is now planning to change the equation behind the reference price as another strategy to revive coal prices in the country.

Adhi Wibowo, director of coal business development at the ministry, said that the reference price in Indonesia was still pegged to international market indices despite the country’s position as a major low-calorie coal producer. He declined to elaborate.

“We’re still assessing [the new formula]. We will announce it in time,” he said in Jakarta on Wednesday.

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