Coal Mining Industry Indonesia: Government in Search of Unpaid Bills
Starting from the fourth quarter of 2015 Indonesian governors will have the power to revoke mining permits when miners - those operating with a Mining Business Permit (IUP) - fail to meet requirements for the so-called “clean-and-clear” status. The clean-and-clear status shows that the mining company has no outstanding royalty and other tax obligation, fulfilled exploration and environmental commitments, has no property delineation issues, and obtained the necessary forestry permits.
Indonesia’s Energy and Mineral Resources Ministry is currently conducting research to check whether the country’s miners comply with (royalty and tax) payments as well as environmental regulations. It also investigates whether miners’ activities do not overlap with other mining areas/permits.
According to the ministry there are currently 10,432 IUP-holders active in the nation’s mining industry. However, only 6,156 have obtained the mandatory clean-and-clear status.
Reportedly, approximately 2,000 unpaid bills (including royalties, dead rent, land rent, and coal sale fees), valued at a combined total of IDR 10 trillion (USD $705 million), still need to be settled in Indonesia’s mining industry. The Ministry of Energy and Mineral Resources met the Corruption Eradication Commission (KPK) on Wednesday (02/09) to discuss the legal standing of these unpaid bills which date back to the period 2001-2011.
Bambang Gatot, Coal and Minerals Director General at the Energy and Mineral Resources Ministry, refrained from mentioning any names of mining companies that are still in debt to the government. The ministry will send three warning letters first before imposing sanctions. It is also not revealed whether it involves mining companies that are already producing commercially or are still operating in the exploration stage.
According to the latest data from the Energy and Mineral Resources Ministry, non-tax revenue from the mining sector stood at IDR 19.7 trillion (USD $1.4 billion) in the first eight months of 2015, or approximately 37.7 percent of the full-year target in 2015, making it highly unlikely that the full-year target will be achieved.
Indonesia is one of the world’s key exporters of coal, nickel and tin. However, as the 2000s commodities boom ended in the late 2000s miners have seen profit and revenue figures plunge. The sluggish global economy (particularly caused by China’s downturn) has resulted in low commodity prices. Last month, the Indonesian Coal Mining Association (APBI) said that almost 80 percent of Indonesian coal miners have temporarily ceased production as the production cost margin has turned negative.