Indonesia revokes mining, coal permits

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Indonesia revokes mining, coal permits

The government of Indonesia has revoked thousands of permits for mining, coal and forestry as it seeks to rein in its vast resources sector.

The country’s President Joko Widodo’s made the revocation following a wrangle with coal producers over their failure to supply the domestic market, which sparked a ban on overseas shipments by the world’s biggest thermal coal exporter.

His move highlights the challenges Indonesia faces in governing its natural resources, which include up to 17 billion tonnes of coal reserves and Asia’s biggest area of exploitable tropical forest.

Lack of mechanism

Widodo said his administration revoked 2,078 permits for mining, mineral and coal businesses because the firms failed to provide work plans, misused the permits or transferred them to other parties. The government also revoked almost 200 forestry permits covering more than 31,000 square kilometres (12,000 square miles) — an area about the size of Belgium.

“Some permits have been granted for years but they were never carried out. This has turned natural resources that should be used to improve public welfare into a hostage. Power producers who fail to comply with their obligations to ensure domestic electricity generators are supplied will also have their licences revoked. Companies that don’t meet their obligations … should be sanctioned, not just with export permit bans but also the revocation of business permits,” Widodo said.

State utility PLN warned that power stations were just days away from running out of fuel, threatening about 10 million customers with imminent blackouts. Earlier, Minister for State-owned Enterprises Erick Thohir sacked PLN’s primary energy director. In a statement, PLN confirmed it had appointed a new director, saying the move “is part of the efforts to improve the performance of the company”.

“There is no supervision. There is no mechanism to ensure that each power plant has enough supply. Coal producers do not consistently play by the rules,” said Marwan Batubara, director of think tank Indonesian Resources Studies.

“With global coal prices much higher than the $70 per tonne cap on what Indonesia pays, producers have no incentive to supply the domestic market,” Macquarie Group commodities analyst Lynn Zhao said.

 

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