MAC: Mines and Communities

Indonesia: No checks on coal mining, says government report

Published by MAC on 2012-05-08
Source: Jakarta Post

Indonesia is the world's top coal exporter. However, limitations in the supervision of its extraction may be placing the country at risk of massive financial losses and environmental damage.

That's  the conclusion of  an investigation, recently carried out by the country's Supreme Audit Agency.

The audit claims that  more than 1,000 mining companies across the country have failed to comply with environment-related requirements.

No checks on coal exploitation

By Hasyim Widhiarto

The Jakarta Post

30 April 2012

Jakarta - Indonesia may be the world's top coal exporter, but limitations in the supervision of coal mining may be placing the country at risk of massive financial losses and environmental damage, an investigative audit by the Supreme Audit Agency (BPK) has revealed.

The audit, a copy of which was obtained recently by The Jakarta Post, blamed the Energy and Mineral Resources Ministry for failure to provide a set of decrees stipulating a mechanism on supervisions and sanctions for coal miners as mandated by the 2009 Minerals and Coal Law.

"This has undermined the government's law enforcement measures and supervision toward mining activities," said the audit report, which was submitted to the House of Representatives and President Susilo Bambang Yudhoyono early this month.

"Miners committing violations have never received any sanctions, tempting them to repeat their violations and create potential state loses," the audit said.

Although local administrations have the authority to issue several mining permits, a decree from the ministry is needed to ensure the administrations and miners comply with the law, according to the BPK.

The agency's audit covered state budget management for the 2010 fiscal year and the first half of 2011, and was completed in December last year. The full report was only made public this month.

The audit covered coal mining activities and local administrations in South Kalimantan, East Kalimantan and Central Kalimantan. Kalimantan is the world's largest exporter of thermal coal for power plants.

Due to the absence of supervision, the audit, for example, found 329 mining companies on the island had evaded paying royalties and permanent fees amounting to US$43.3 million and $10.4 million (Rp 94 billion) in the 2010 fiscal year alone.

On the environment side, the audit found that 43 mining companies had not fulfilled technical and financial guarantees related to compulsory reclamation and post-mining rehabilitation. Five miners in East Barito regency, Central Kalimantan, were even found to be operating in a forest without a license.

"A failure by the companies to comply with environment regulations will cause problems that will eventually be a burden on regional and state budgets," said the audit.

An executive with the Indonesian Forum for the Environment (Walhi), Mukri Friatna, said a clear regulation on supervision would allow the authority to immediately take action against mining companies that created environmental damage.

"There are more than 1,000 mining companies across the country that fail to comply with environment-related requirements," Mukri said.

Indonesia, which exports 75 percent of its coal output, mostly to China and India, has been enjoying a "coal boom" in the last 10 years.

However, legal infrastructure and supervision mechanisms have failed to run at pace with exploitation, giving rise to substantial problems for not only environment and state revenue potential, but also for legal disputes between companies.

The BPK audit also highlighted several overlapping concessions in Kalimantan that were primarily caused by local administrations. As of March, only 40.5 percent of 10,235 listed companies had received legally "clear and clean" statuses for their concessions.

"To a certain extent, the central government must intervene in regional administrations on the issuance of mining permits to prevent any future disputes," said Indonesian Resources Studies (Iress) chairman Marwan Batubara.

The ministry's director general of mineral and coal, Thamrin Sihite, could not be reached for comment. However, in his official response to the BPK last November, Thamrin said the ministry was currently in the process of deliberating a ministerial decree on the matter that was aimed at addressing the supervision issue.

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