PRESS RELEASE
No: No: 069/Ex-J/PR/Koord/VII/2018
To be published on 25th July 2018 and afterwards
Publish What You Pay (PWYP) Indonesia asked the Indonesian Government to be consistent with its coal production control policy, as mandated by the National Medium-Term Development Plan (RPJMN) of 2015-2019, which has also been strengthened by the issuance of Ministerial Regulation (Permen) Number 25 of 2018 concerning Mineral and Coal Business. Whereas in the Ministerial Regulation has regulated regarding the authority of the government to conduct coal production control policies.
In the RPJMN of 2015-2019, this year’s production target is only 406 million tons, with a scenario that must be reduced to only 400 million tons in 2019. However, by looking this year’s first semester production which has reached 163.44 million tons, it appears that by the end of this year will be more than 485 million tons (targets of Work Plan and Budget). Whereas the National Energy General Plan (RUEN) has also been in line with the RPJMN which has ruled in the scenarios for coal production limitation, given the environmental impacts (carbon emissions / greenhouse gases and deforestation) as well as the potential health impacts.
PWYP Indonesia’s Mining Governance Researcher, Rizky Ananda deplored the government’s inconsistency in controlling coal production. In fact, other than RPJMN and RUEN, Permen ESDM 25/2018 has reaffirmed the Government’s authority to implement a production control policy, the Government should be able to set a coal production limit that must be obeyed by business actors. Rizky further criticized the government so far has in fact trapped by a wrong mechanism, which is shown by the determination of national production targets based on the company’s proposals in the RKAB (Work Plan and Budget) both PKP2B and IUP in the central and provincial government. Rizky asserted “The government should set annual national production figures in accordance with the policy planning scenario, then followed by the establishment of production limits for each company, so it should be with a top-down mechanism instead of bottom-up. This indicates that the Government tends to be driven by market interests that hunt for income from commodity trading, not the strategic interests of development that have been planned in the RPJMN” added Rizky.
DMO Liability and Production Restrictions
Rizky added that this policy inconsistency also has hindered the implementation of coal production control policy. One of them is the Decree of Minister of Energy and Mineral Resources No. 1395K / 30 / MEM / 2018 which in fact gives incentive to increase production quota by 10% for business actors that fulfill Domestic Market Obligation (DMO) obligation. As the matter of fact, the allocation of DMO of 25% has become the obligation of the business actor. “It should not need to be given incentives, because it actually triggers excessive coal exploitation, especially when the prices crawl up” Rizky said.
Meanwhile, sanctions for production quota cuts (through Ministerial Letter of Energy and Mineral Resources number 2841/30 / MEM.B / 18) for business actors who do not fulfill DMO obligations are also doubted their effectiveness without strict supervision from the Government. “The reason is that supervision has been relied on the reports that are self-reporting from business actors. While KPK’s Coordination and Supervision of Mineral and Coal (Korsup Minerba) revealed that the level of compliance of business actors in reporting production and sales to licensors is still low. Likewise, with the compliance of the regional government in submitting reports on the supervision of production and sales to the central government “said Rizky.
“More than 1,575 coal IUPs are in the production operation phase, only 41 of them are permits from central government (March 2018). The rest is provincial permits. Therefore, local governments also have an important role in the supervision of production “, added Rizky.
Regarding the compliance of business actors, particularly in fulfilling the financial, environmental, and closing loopholes in the production and sales chains, a number of issues still overshadow coal governance in Indonesia. For example, there are still 710 Mining Business Permits (IUP) with non-clean and clear status (March 2018); and there are still outstanding of non-tax state from mining company (Mineral and Coal) with their unresolved non-tax State Revenues (PNBP), valued at Rp 4.5 trillion (July, 2018).
Coal and Development Strategy
Maryati Abdullah, National Coordinator / PWYP Director of Indonesia emphasized that the Government’s consistency in controlling coal production is very critical and must be prioritized as part of the development policy strategy. In addition to consideration of environmental carrying capacity and control of greenhouse gas emissions, production control is also part of the strategy to maintain the resource balance, to ensure effective utilization and have clear outputs.
“So the use of coal must be ensured to have more effective value for development, not just a direct income of the state revenue from commodity sales – but there is also a potential for leakage, and also must have a clear utilization strategy and support the development goals and strategic objectives. Therefore, the amount of production quota must come from the government not from business actors, let alone by selling incentives for the addition of production quotas which are not necessarily effective ” stated her.
Maryati further revealed “The provision of incentives in the form of an increase in production quotas in the midst of coal prices that are being sold (even the highest record in the last five years) is very improper. Instead of meeting the needs of the DMO – it can trigger massive exploitation, while there are still problems in price fixing and quota transfers, weak supervision, low compliance, the presence of non-CNC IUPs, unpaid business actors’ PNBP arrears, and problems shadowing social and environment issues”..
Maryati Abdullah added, the policy of controlling coal production had a wider spectrum. The production control policy is closely related to the licensing and state revenue policies. Production control can only be achieved if mining permits are controlled as well as functions of supervision are improved. The reason is that no solid sanction instruments from the government if there are business actors who will violate the provisions of the amount of production agreed at the RKAB. Therefore, coal production will become difficult to control.
In addition, it is difficult to implement production control policies if coal is still burdened with revenue targets, especially Non-Tax State Revenues (PNBP). It is time for the government to shift from a coal management paradigm that only produces short-term benefits, which is state revenue. The government must place this issue for the medium and long-term development strategic interests, and they should have a clear and measurable indicator of success from development strategy #.
Contact Person:
Rizky (rizkyananda@pwyp-indonesia.org)