Indonesia's Ministry of Energy and Mineral Resources (ESDM) has encountered a stumbling block in the implementation of the coal domestic market obligation (DMO) compensation channel collection scheme, according to a report by local media Bisnis.
Special Staff to the Minister of Energy and Mineral Resources, Irwandy Arif, disclosed that the obstacle arises from coal companies' request to overhaul the coal reference price formula, known as HBA. However, issues concerning the imposition of value-added tax (VAT) on the collection and distribution of the coal compensation fund (DKB) and royalty matters have been successfully resolved.
Arif elaborated that coal companies expressed concerns over the disparity between the actual selling price of coal and the HBA benchmark. To address this challenge, the Ministry of Energy and Mineral Resources is planning to revise the HBA calculation. The revision involves transitioning from using the average selling price of coal over the previous two months to only one month, aiming to bring the HBA benchmark closer to the actual selling price.
The ministry is optimistic that the HBA formula revision will be completed promptly, facilitating the finalization of rules for the collection scheme to channel coal compensation funds. However, Arif acknowledged the need for due process and coordination with the Coordinating Ministry for Maritime Affairs and Investment.
Earlier, the delay in the deadline for channeling the collection through the Mandated Lead Arranger and Issue Manager (MIP) was attributed to VAT-related issues. Minister of Energy and Mineral Resources Arifin Tasrif emphasized that further discussion was required to resolve the VAT matter, with the target for coal compensation fund management set to begin in the first semester of 2023 once the VAT issue is resolved.
Regarding the management of DKB, the task has been entrusted to three Himbara banks acting as MIP, including PT Bank Mandiri (Persero) Tbk. (BMRI), PT Bank Negara Indonesia (Persero) Tbk. (BBNI), and PT Bank Rakyat Indonesia (Persero) Tbk. (BBRI). Meanwhile, the ESDM will oversee the role of the non-tax state revenue management agency (PNBP).
Under the scheme, all companies holding mining business licenses (IUP), special mining business permits (IUPK), and coal mining concession agreements (PKP2B) are mandated to pay DKB to MIP. The pooled funds will subsequently be distributed as compensation to coal companies that have entered into DMO supply obligation contract transactions. The distribution of compensation takes into account the deductible value of royalty obligations, operational costs, and reserve funds.
The Ministry emphasized that technical instructions for workflow and responsibilities between management agencies and MIP are meticulously regulated in the Permen [Ministerial Regulation] and Kepmen [Ministerial Decree] plans for ESDM. Despite the challenges, the ministry remains committed to streamlining the coal DMO compensation collection scheme and ensuring its smooth operation.
(Writing by Alex Guo Editing by Emma Yang)
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