Indonesian Government Raises Royalty Fees in the Coal Mining Sector
In order to increase government revenues, the Indonesian government announced that, starting from 2014, coal miners that have a Mining Business License (Izin Usaha Pertambangan/IUP) will have to pay a higher royalty fee to the central government. The decision was made during a meeting between the government and Commission XI of the House of Representatives (DPR) this week. The new royalty policy, which was originally planned to be introduced this year, is expected to result in an increase of IDR 4 trillion (USD $408.2 million) in state revenues.
The new coal miner royalty fee is set between 10 and 13 percent, depending on the quality of the coal. Previously, the government used two different sets of royalty fees: one for smaller IUP holders (3.5 to 7.0 percent) and one for the larger coal miners (10 to 13 percent). With this new policy, royalty fees will be the same for all coal miners active in Indonesia (but the exact number within the fee range is still subject to the quality of the coal).
The new policy framework is also part of a plan to gain more structure in Indonesia's coal mining sector. Many coal miners that work under IUPs do not pay taxes to the central government as permits are issued by local governments and the local mining sector is often not clearly structured (overlapping concession areas frequently happen due to weak local government governance). Therefore, the central government has been trying to create some order by introducing the 'clean and clear' policy. The clean and clear status indicates that a specific mining area has all required documents (including tax payments) and no overlapping areas. Export of coal and other minerals have been restricted to those that hold the clean and clear status.
The Indonesian Coal Mining Association voiced its concerns about the new royalty policy and sees it as harmful to the attractiveness of Indonesia's coal mining industry.