Indonesian Govt may take coal royalty in-kind to secure domestic supplies

The government may ask coal producers to pay royalties in kind rather than in cash to secure supply for domestic power plants, Koran Tempo Daily reported on Friday.

“I have recommended the change and the issue is currently being deliberated at the Finance Ministry,” Minister of Energy and Mineral Resources Purnomo Yusgiantoro said in Jakarta on Thursday.

He added the government also continued preparing a regulation on domestic market obligation requiring coal mining companies to set aside a certain portion of their output to the domestic market.

Under the coal contract of work (CCoW), coal-mining companies are obliged to set aside 13.5 percent of their annual production as royalty to the state. At present, however, the coal companies pay the royalties in cash rather than in kind.

Purnomo said the coal royalties were more than enough to fulfill the coal needs of the domestic market. The country’s coal output now stands at 230 million tons. 13.5 percent of the amount is equivalent to 31.05 million tons, while the domestic need is 28 million tons.

News Source : July 11, 2008 / Petromindo.com

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