Fiscal incentive policy for coal downstreaming in Indonesia

Abstract

This study aims to describe the coal downstreaming program which is expected to increase the added value of coal in Indonesia. Increasing the added value of coal such as the gasification project has a strategic role to increase state revenues and foreign exchange and is expected to have implications for increasing development in the region and nationally. The research method used is a quantitative and qualitative approach. The quantitative approach is used the accounting approach and benefit cost analysis (BCA), while the qualitative approach is used in the study of literature and focus group discussions. From the results of the discussions, the Government can provide coal gasification fiscal incentives to pioneering companies with the consideration that this downstreaming program will be able to spur state revenue as well as regional and national economic growth. Besides this downstreaming activities will be able to increase similar activities in Indonesia.

Market Reaction to the Implementation of Coal Royalty Tariff Policy in Indonesia

“…The royalty-free policy should boost the nation's coal processing industries (development and utilization) in a bid to replace energy imports while optimizing its upgraded domestic coal added value which in turn results in an increase of production value, investment and employment in the sector. Even though this government's fiscal incentive scheme of zero-percent royalty could reduce non-tax state revenue in the short term, nevertheless in the long run it is expected to improve national and regional economy with a surge in Gross Domestic Product (GDP) and Gross Domestic Regional Product (GDRP) estimated by three times (Ragimun & Rosjadi, 2020). Therefore, the Government strongly supports downstream beneficiation for the nation to obtain maximum value from this valuable yet non-renewable coal resource.…”