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6 July 2020 (closed)
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Indonesia's Ministry of Energy and Mineral Resources will prepare new regulations regarding coal production in the regions. Usually, local coal miners, together, produce much more coal than what is targeted by the central government. By implementing stricter regulations and better monitoring (by enhanced coordination between the central and regional governments) there should be less opportunities for Indonesian coal miners to produce excess supply in the future.
Sujatmiko, spokesman for Indonesia's Energy and Mineral Resources Ministry, said these new regulations will become more effective after the government has completed the reforming of licenses in the mining sector.
In recent history the regional governments of Indonesia in coal-rich areas (particularly Kalimantan and Sumatra) issued thousands of Mining Business Permits (Izin Usaha Pertambangan, or IUPs) without keeping proper administration. Hence, there occur numerous cases of overlapping concession areas, while many of the mining companies lack the mandatory clean and clear certificate (CnC) that was introduced two years ago (the CnC status shows that the miner has no outstanding royalty obligations and other tax debts, fulfilled its exploration and environmental commitments, has no property delineation issues and obtained the necessary forestry permits).
Most likely local authorities were eager to issue IUPs (as many as possible) because they received "under-the-table" cash payments. Per November 2016, the government issued a total of 10,818 IUPs. However, only 6,404 have the CnC status, implying there remain more than 4,000 troubled mining licenses.
This year the central government targets to see coal production at 419 million tons. However, Bambang Gatot, senior official at the Ministry of Energy and Mineral Resources, said production realization is bound to exceed the government's target, as usual. In 2015 the government set the target of 425 million tons of coal. However, national coal production reached 461 million tons at the year-end, far above the target (and this official figure does not even include the vast amount of illegal coal shipments from Indonesia).
Hendra Sinadia, Deputy Executive Director of the Indonesian Coal Mining Association (APBI), believes Indonesia's coal production will rise in 2017 as miners will be eager to sell more coal now the coal price has surged drastically in recent months. However, he adds that part of the mining community will remain careful not to boost production too much as they are aware about the possibility that coal prices will slide again in 2017 due to rising global output.
The government not only wants to curtail coal production. It also wants to curb coal exports in order to safeguard future coal supplies for the domestic market (particularly for domestic power generation). After reforming the IUPs - implying that perhaps thousand permits need to be revoked - it should automatically result in lower coal production in Indonesia, Gatot said.
Indonesian Government's Benchmark Thermal Coal Price (HBA):
Source: Ministry of Energy and Mineral Resources
Indonesian Production, Export, Consumption & Price of Coal:
(in million tons)
(in million tons)
(in million tons)
¹ Government target
Sources: Indonesian Coal Mining Association (APBI) & Ministry of Energy and Mineral Resources