Government Incentives – Coal Industry

The government has prepared nine incentives to encourage the advancement of the coal downstream industry. The nine incentives include:

1. Up to 0% coal royalty for gasification.

2. A special coal price formula for gasification.

3. The validity period of the Mining Business License (IUP) is in accordance with the economic age of the gasification project. 

4. Tax holiday (corporate income tax specifically according to the economic age of coal gasification).

5. Exemption from VAT on coal processing services to syngas by 0%. 

6. Exemption of local content EPC VAT.

7. The benchmark price for gasification products such as the DME benchmark price.

8. Transfer of part of the LPG subsidy to DME according to the portion of the substituted LPG.

9. Assurance of off takers (buyers) of downstream products. The discussion is being carried out by the Ministry of BUMN.

Based on the nine incentives, the first to third incentives help to encourage the downstreaming of coal in gasification, both in syngas, methanol, and DME. Therefore, the government will also provide subsidies for Dimethyl ether (DME) products which are the result of coal grasification. The provision of subsidies for DME products aims to make the LPG price which is at the lowest price level of all time, of course not always sustainable. 

PTBA, which is the pioneer of coal grasification, is ready to carry out the mandate of Presidential Decree No. 109 of 2020 for the development of downstream coal into DME to reduce LPG imports. The coal downstream plant will process as much as 6 million tons of coal per year and process it into 1.4 million tons of DME per year and replace around 1 million tons of LPG per year.

In addition to incentives, the government has also formed a working group to prepare a road map for the development and utilization of coal. The Working Group consists of:

1. Coal Resources Working Group.

2. Working Group on coal infrastructure and downstream product infrastructure.

3. Working Group on technological readiness for economic and environmental feasibility of downstream processes.

4. Working Group on policy support and cooperation schemes.

5. Working Group on the readiness of the downstream product marketing strategy.




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