The government is appointing state-owned banks and ministries to implement and manage the collect-channel scheme in coal management in the country, for export as well as the domestic market obligation (DMO).

Implementation constrained

Previously, the plan was to start the scheme in 2022, through the establishment of a Coal Public Service Agency (BLU). However, it was constrained by the black gold commodity management scheme.

Arifin Tasrif, Minister of Energy and Mineral Resources, said that the delay in the implementation of the coal collect-channel scheme through the MIP was due to the issue of the 11% value added tax obligation.

"Further discussion is still needed because it is related to the imposition of VAT (value added tax). The target for the management of the coal compensation fund [Dana Kompensasi Batubara - DKB] can start in Semester I 2023 if this VAT issue can be resolved," said Arifin.

Mandiri, BRI, and BNI appointed to manage the development

The government appointed three state-owned bank companies, Bank Mandiri, Bank Rakyat Indonesia (BRI), and Bank Nasional Indonesia (BNI) as BLU managers. Later, the government will become the overseer for the export levy scheme and the distribution of coal compensation funds from the DMO policy carried out by the Managing Agency Partners (Mitra Instansi Pengelola - MIP).

MIP will later collect compensation from business entities that do not fulfill DMO obligations, which will then distribute it to parties that comply with domestic supply requirements.

Currently, the rules for the collect-channel scheme have reached the finalization stage. Parties involved in supervising the scheme include the Ministry of Energy and Mineral Resources, the Ministry of Finance, and the Coordinating Ministry of Maritime Affairs and Investment.

Later, the DMO scheme managed by the BLU will be channeled for purposes such as: 

• State Power Plant (PLN) will buy coal according to market prices;
• PLN will receive subsidies from BLU from fees collected from coal companies;
• PLN still gets a price according to its ability because the BLU subsidy will cover the difference in market prices;
• PLN will have supply contracts with several coal companies.

Meanwhile, the Ministry of Energy and Mineral Resources will act as the non-tax state revenue management agency (PNBP). Later, all companies holding mining business permits (IUP), special mining business permits (IUPK), and coal mining concession agreements (PKP2B) are required to pay DKB to MIP.

"It's clear, the harmonization has been completed. Just wait, in the near future, there will be more discussions about the finalization process," said Lana Saria, Director of Coal Exploitation at the Ministry of Energy and Mineral Resources, on July 11, 2023.

Collection and distribution of funds

On the other hand, there is a provision for an 11% value-added tax liability for the collection and distribution of coal compensation funds through the MIP scheme.

Afterwards, the collected funds will be distributed as a form of compensation to coal companies that have entered into DMO supply obligation contract transactions. The distribution of compensation has taken into account the deductible value of royalty obligations, operational costs and reserve funds.

In its function as an agency to channel the collected funds, it is projected that MIP will manage a large amount of compensation funds due to the large number of business entities in the country.

This is due to the large difference between the price of coal on the global market and the DMO of US$ 200 per ton, and it is estimated that MIP will be able to manage IDR 137.6 trillion in funds.

Responses from entrepreneurs

Hendra Sinadia, Executive Director of the Indonesian Coal Mining Association (APBI) said that he had asked the agency to manage funds in a transparent, accurate manner and consider input from business actors.

He said that the existence of this coal management institution was actually highly anticipated by various business entities and could be a middle ground for differences in commodity prices in the global market.

Prior to the existence of this institution, the issue of price institutions was often the cause for business entities to prefer exporting coal over selling domestically to fulfill domestic obligations which were pegged at 25% of the annual production plan.

Previously, various business entities took advantage of the high price of coal to reap higher profits through exports rather than selling it to the State Power Plant and various domestic industries at low prices.

With all of this, it is hoped that the channel-charging scheme for exports and DMO compensation can be implemented soon.