If production rate maintained, Indonesia coal reserves to deplete in 29 years More coal should be allocated for domestic use than for exports

The implementation of the General Planning for National Energy (RUEN) road map, particularly for the coal sector, is likely to be hindered by the weak governance that continues to plague the industry.

The RUEN, a road map for the government’s energy and mining targets until 2050, stipulates a production cap of 400 million tons per year for coal starting in 2019.

It also stipulates that coal should not be exported after 2046.

The cap is to be set in order to minimize the need for exports and maximize domestic consumption to fuel power plants and manufacturing industries.

Moreover, the cap and export ban are to be set in order to preserve the country’s depleting coal reserves so that Indonesia will not have to rely on imports in the future, as it does for oil.

The RUEN also describes the government’s need to produce better quality coal with cleaner technology and also to set up national reserve areas as stipulated by the 2009 Mining Law.

However, the government’s history of poor management and governance in the coal sector has planted doubts that the road map will be followed.

Researchers at Publish What You Pay (PWYP) Indonesia have identified several problems that will hinder the implementation of the RUEN, including the lack of due diligence in the issuance of thousands of mining licenses.

National coordinator Maryati Abdullah cited as an example that the number of licenses issued had skyrocketed to 10,000 in 2010 from 750 in 2001, mostly because of a lack of coordination during the transition period to regional autonomy.

“There is also a very weak monitoring of production and sales, in addition to weak monitoring of state revenues. This has led to indications of illegal exports and production not in line with the work plans and budgets,” she said on Monday.

While the government data shows that about 300 million tons of coal of the 413 million tons set to be produced this year would be exported, Maryati has argued that there are still many cases of illegal exports and undetected production that the government does not take into account.

According to PWYP, coal reserves will be completely depleted in 29 years if the country continues to produce more than 450 million tons per year.

However, it seems that the government may not even comply with its own regulations as the Energy and Mineral Resources Ministry has proposed the National Planning Agency (Bappenas) raise this year’s production to 477.91 million tons.

According to PWYP, as of Feb. 20 coal and mineral firms owed the government Rp 4.92 trillion (US$369 billion) in royalties and taxes.

The lack of compliance and governance in the sector is not just reserved to production and revenues. The same data shows that up to 5.6 million hectares of conservation and protected forests have been destroyed for coal mines.

National Energy Board (DEN) member Sonny Keraf said that stronger governance was needed in order for the government to reach its RUEN targets. The former environment minister noted that much of the leeway in the coal sector was due to the fact that the government continued to look at coal as a commodity to fill state coffers, instead of as a raw material that can be processed to generate a higher value.

“[Coal] is not just a commodity but is capital for development. The 2009 Mining Law clearly stated that there must be added value from energy. Basically, we cannot export it for state revenues, but we must use it as fuel for power plants and materials for the manufacturing industry,” he said.

Source: PressReader The Jakarta Post