Indonesia braces for swelling coal production

JAKARTA (The Jakarta Post/ANN) - Indonesia has thrown in the towel on its plan to set a coal production cap starting in 2019, as domestic production has kept soaring from one year to the next amid the government’s need to boost non-tax state revenues (PNBP).

Through its 2015-2019 strategic plan, the Energy and Mineral Resources Ministry initially planned to gradually decrease the country’s annual coal production from 419 million tons in 2016 to 413 million tons in 2017 and 406 million tons in 2018.

Then, the ministry aimed to limit coal production to a maximum of 400 million tons per year starting in 2019, so it could prioritize it for domestic use, especially considering the development of various coal-fired power plants in the country.

In fact, the realized domestic coal production stood at 456 million tons in 2016 and 461 million tons last year.

Bambang Gatot Ariyono, the Energy and Mineral Resources Ministry’s mineral and coal director general, said it was difficult to prevent all holders of coal mining permits (IUP), particularly ones that have conducted feasibility studies or have started the construction process at the mining sites, from entering the production stage.

“The production figure also determines a miner’s return on investment [ROI],” Bambang said on Thursday.

“Therefore, the government will only be able to restrain the production quota of each miner. For 2018, we can only tolerate a 5 percent increase in domestic coal production to around 485 million tons.”

Despite the increase in production, Bambang said the ministry would try its best to ensure sustainable mining activities in the country, though he acknowledged that thousands of miners had yet to make deposits into the reclamation-guarantee fund, which is supposed to be used for post-mining rehabilitation.

At present, only around 50 percent of 6,565 mining permit holders in the country have made deposits to the administrations of regions in which they operated for post-mining reclamation.

On the other hand, the increase in coal production has played a role in boosting the government’s PNBP collection.

Throughout 2017, the PNBP from the mineral and coal sector reached Rp 40.6 trillion (US$2.84 billion), surpassing the full-year target of Rp 32.7 trillion.

Of the total production last year, the government exported 364 million tons of coal, down slightly from 365.5 million tons in 2016.

Meanwhile, domestic coal consumption reached 97 million tons last year, up from 90.5 million tons in 2016 but still far below the original 2017 target of 121 million tons.

Bambang said the government was unable to meet the 2017 consumption target due to delays in the completion of several coal-fired power plant projects, in addition to slowing industrial activities. Nonetheless, he was upbeat the country could increase the domestic consumption figure to 114 million tons in 2018.

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