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Indonesia lifted ban on coal export
2022-01-12

     The Indonesian government will review whether to lift the coal export ban today on January 12. At the same time, Indonesia is also considering levying coal tax on mining enterprises, which will be used to assist the State Electricity Company(PLN) to buy coal at the market price.

     Indonesia suspended coal export for 10 days, relaxed the ban and decided to resume coal export in stages. The authorities also consider levying a coal tax on mining enterprises and using the tax to assist the state power company in purchasing coal for power generation.

     After the news, the price of China's thermal coal futures fell 3% to ¥ 685 (about S$ 145) on January 11.

     Coordinating Minister of Maritime Affairs and Investment Luhut Binsar Pandjaitan announced at a press conference on January 10 that the official provisions for lifting the coal export ban are being finalized.

     "After seeing the great improvement in the coal supply of the state power company, 14 ships loaded with coal and paid by the buyer can be released for export immediately," he said.

     He also said that the Indonesian government will review whether to cancel the coal export ban on January 12. If it decides to cancel it, it will be implemented gradually, because it also takes into account the impact of the resumption of exports on mining enterprises' compliance with the so-called "domestic market obligation" (DMO) policies and rules. According to the policy, coal miners must reserve 25% of the annual coal production to the State Electricity Company, and the supply price can not exceed $ 70 (about S$ 94) per ton, which is far lower than the market price.

     The Director of Directorate of Sea Transportation of the Department of Transportation of Indonesia said in an interview that as of the morning of January 11, the Department of Transportation had not approved any ships carrying exported coal to leave the port and was still waiting for instructions from the Ministry of Energy and Mineral Resources.

     According to financial market data provider refinitiv, about 120 coal carriers are stranded at the port of Kalimantan, Indonesia's main coal exporter.

     After Indonesia's State Electricity Company reported that its coal inventory fell to an ultra-low level at the end of last year, Indonesia announced that it would stop coal export for one month from the 1st of this month, so as to alleviate the shortage of domestic coal supply and avoid the shortage of domestic electricity supply.

     In order to prevent the State Electricity Company from falling into the dilemma of insufficient coal supply again, the Indonesian government considers levying coal tax on mining enterprises, which will be used to assist the state power company to buy coal at the market price.

     According to the relevant official documents seen by Reuters, one of the possible tax methods is to tax according to the coal output. The tax rate will depend on the gap between the market price and the maximum supply price of $70, and will be reviewed regularly.

 

     The possible tax rate listed in the official documents is $ 3.87 per ton, so it is estimated that about $ 2.5 billion can be provided to the State Electricity Company for coal purchase every year.

     Luhut revealed that the government also plans to dissolve Batubara, a coal procurement company under the State Electricity Company, and the State Electricity Company will negotiate directly with mining enterprises.

     The Indonesian government pointed out that there was a serious shortage of coal in the state power company because most mining enterprises did not follow the DMO policy and reserved 25% of the annual coal output to the domestic market.

     In addition to suspending coal exports, Indonesian President Joko also announced last week that 2078 coal mining licenses and 234 forestry and planting licenses were revoked to tighten controls on the development of natural resources.

     The Jakarta Post analyzed and reported that the crisis threatening the power supply of 10 million users is in the final analysis caused by the serious lack of supervision in the coal mining industry. According to the survey of Indonesia Anti Corruption Commission in 2014, the coal mining industry not only lacks supervision and transparency, but also generally has tax evasion. The survey found that among the 3826 mining enterprises, 725 were not registered as tax paying enterprises; There is a huge gap between the coal production data collected by the local government and the Indonesian Bureau of statistics; Many county and provincial governors abuse their power to issue mining licenses to enrich themselves.

     It is reported that the current coal supply crisis provides a good opportunity for Indonesia to strengthen the transparency of natural resource management. The complete transparency of licensing regulations and issuance procedures will help civil society and non-governmental organizations supervise mining, reduce corruption and attract reputable mining enterprises to invest.

    Indonesia is the world's largest exporter of thermal coal, with an export volume of about 400 million tons in 2020. Indonesia's suspension of coal exports caught its main customers by surprise. Japan, South Korea, the Philippines and other countries have put pressure on it to lift the ban.