The domestic coal price is set at US$70 per metric ton under the policy and aims to help state-owned electricity company PT PLN to purchase coal for less than the global coal price, as the government has decided not to increase electricity rates until 2019.

Coal-fired power plants (PLTU) contribute about 57 percent to national electricity production.

Director general of budget Askolani at the Finance Ministry said the policy would cause a drop of Rp 3 trillion (US$210 million) to Rp 4 trillion in tax revenues, while non-tax revenues would decrease by Rp 4 trillion to Rp 5 trillion.  

Meanwhile, the DMO policy would affect state revenues in royalties from coal mining companies and would also affect coal companies’ profits, which means that income tax earnings would also decrease.

“Income tax will decline both from coal miners and PLN,” said the Directorate General of Taxation's tax revenue and compliance director, Yon Arsal, as reported by kontan.co.id.

However, Askolani said the decrease in revenues from the DMO policy would not significantly affect the state budget, because it would be offset by a projected increase in coal export royalties upon an increase in commodity prices.

“State revenue from the diversified mining sector will still fulfill the target in the 2018 state budget,” he added. (bbn)

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