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Graft, illegal practices plague coal mining in South Sumatra
Sellers soon required to use verification certificationsWidespread illegal coal mining in South Sumatra is estimated to have caused millions of dollars in state losses, a recent antigraft agency investigation has found
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Sellers soon required to use verification certifications
Widespread illegal coal mining in South Sumatra is estimated to have caused millions of dollars in state losses, a recent antigraft agency investigation has found.
The Corruption Eradication Commission (KPK) found in August that the transport of illegally mined coal in the province, through Lampung, had been going on for years.
Dian Patria, the KPK’s regional coordinator for graft prevention coordination and supervision, said the agency had initially investigated a tipoff pertaining to unauthorized coal mines in South Sumatra. Later, the antigraft body’s team found that the commodity was being transported using a 10 ton truck from Muara Enim regency to Lampung through Martapura district, where unidentified people joined the convoy to safeguard the shipment.
In Lampung, the coal is transported by a 25 ton truck to factories or to Bakauheni Port to be later transported by ferry to Merak Port in Banten. The illicit shipments occur at midnight to avoid detection by authorities and locals.
Such illegal coal activities, Dian said, had inflicted state losses, as the state did not receive non-tax state revenue from the unlicensed practices. Aside from the financial losses, the illicit business practices have also caused environmental and social losses, ranging from damaged roads across Lampung and traffic congestion, to social conflict due to the damaged streets.
The governor of South Sumatra banned road vehicles from transporting coal through the province in 2018. In Lampung, road transportation is allowed but all road vehicles transporting commodities must obtain a permit from the province's transportation agency.
The documented coal from South Sumatra is usually transported by train from the province to a seaport terminal owned by state-owned coal mining firm PT Bukit Asam in Panjang Port. It can also be transported using boat to Tulang Bawang regency in Lampung.
After the discovery of the illegal mining and transportation, the KPK had ordered the South Sumatra and Lampung administrations to work together to eradicate such illegal mining practices. The antigraft body also ordered Panjang and Bakauheni ports in Lampung to not issue sailing permits for any ship found carrying coal mined from illegal mines, as well as factories across Lampung to not use commodities distributed illegally.
“Such coordination was also meant to strengthen monitoring and law enforcement against transportation companies found violating the restriction [to transport the coal] in South Sumatra and Lampung,” Dian said.
The findings in Sumatra were announced only a month after the antigraft body found unauthorized coal mining operations within an oil palm concession owned by PT Surya Jorong Lestari in Tanah Laut regency, South Kalimantan. It is against the law to mine in a plantation concession.
KPK adviser Budi Santoso said the antigraft body had cracked down on unauthorized mining to prevent graft.
“Potential state income was wasted due to mismanagement,” Budi said as quoted by Antara.
This is not the first time reports of state losses in the coal mining sector have come to light. Indonesia Corruption Watch (ICW) released a study last year showing that around Rp 365 trillion (US$25 billion) worth of coal transactions between 2006 and 2016 had gone unreported, potentially causing state losses. About Rp 113 trillion of the sum was related to royalties and taxes, due to mismatches in export volume and transfer pricing.
The South Sumatra administration said it had reported the alleged illegal coal mining to the antigraft body, as it found a number of illegal coal mines across the province.
According to the provincial administration, it had found an unauthorized underground coal mine at Tanjungenim in Muara Enim regency. The administration also suspended 68 mining permits and closed down 12 illegal coal selling points in Tanjung Lago.
“In terms of royalties, we may have suffered state losses of around Rp 54 billion annually from one mining location alone,” South Sumatra Energy and Mineral Agency head Robert Heri said.
A mine is considered illegal if the company managing it does not have official records and proof that it has paid coal royalties to the government. Mining permit holders are also obliged to pay a guarantee fund for post-mining reclamation.
The Energy and Mineral Resources Ministry’s coal supervisory and business director, M. Hendrasto, said the ministry would require coal sellers to use sales verification certificates for their products.
The certificates would show data about the commodity, such as where it is mined and whether the company selling it has obtained all necessary permits.
“Every port authority will be authorized to hold ships carrying unidentified coal,” Hendrasto said. He added that the ministry would require coal mining and selling companies to use the certificate starting on Sept. 10.
Meanwhile, coal mining companies operating in South Sumatra have complained about the restriction on transporting coal by road. Mining company PT Buana Eltra said that it had been forced to stop the operation of its mine in Ogan Komering Ulu regency because the mine was not connected to a railroad or river transportation network.
“We have all the permits. I hope the government finds a solution soon, as this has affected around 1,000 workers,” the company’s legal manager, Jontan Nober, said.
