Indonesia, the world’s top exporter of thermal coal, is considering new regulations to limit coal production and tighten controls on exports, government officials said on Friday, and could introduce the rules by early next month.
The country currently exports around 70 percent of its coal production, much of it to China and India, but the government says output must be capped as domestic demand for the power station fuel is expected to rise by 13 percent this year and next. “Technically we are already restricting (coal production) through discussions on companies’ work plans and budgets, but formally we need a ministerial regulation on mines,” Coal Enterprise Director Edi Prasodjo told Reuters, referring to an output cap for producers his team is working to release soon. In March, Prasodjo said Indonesia hoped coal production would remain at or below 421 million tonnes this year, but the government’s ability to restrict output has yet to be proven.
Many of Indonesia’s biggest coal mines, such as Bumi Resources and Toba Bara Sejahtera, are owned by politically connected figures, and with presidential elections fast approaching in July the government may face difficulties imposing new rules on the sector. A Reuters survey of the top six producers in March found all aimed to boost production this year to compensate for continuing low prices.
The government also hopes to impose new rules on shipments, Prasodjo said, requiring miners to register themselves as exporters at the trade ministry and coal shipments only allowed through selected ports. “The ports are already there, but we may need to improve their capacity,” he said, without providing further details. Prasodjo said the rules would apply to all coal miners and would help make sure royalties get paid.
“A large number of coal sales don’t include royalty payments,” Prasodjo said, noting that the government was working out how to impose the new rules on older mining contracts.
The new rules would mean tighter government supervision, as the registration process requires proof of royalty payments among other documentation, said Thamrin Latuconsina, export director for mining and industrial products at the Trade Ministry. The government currently appoints an independent surveyor to inspect coal specifications and volumes of shipments, but coal miners do not currently need to be officially registered with the trade ministry, he said. “We expect the coal export regulation together with an amendment of the tin export regulation to be issued in early July, before the presidential election,” Latuconsina said, adding that his office had not discussed the planned rule to limit the number of ports that can export coal.
Meanwhile, Helmi Najamuddin, coal business director at Indonesia’s state electricity utility PT Perusahaan Listrik Negara (PLN), said the rules would help end rampant illegal mining that he said was flooding the market and keeping coal prices low. “I think it’s good to control the amount of tonnage that is exported,” Najamuddin said.
By Fergus Jensen – Thomson Reuters