Power for Smelters Guaranteed If Built in Java or Sulawesi Only

Posted on Apr 18, 2013

The Energy and Mineral Resource (ESDM) Ministry will only guarantee the electricity for smelters if it is constructed in Java or Sulawesi where the generation situation is not as bad as the rest of the countries.

This is stated by the Directorate General of Electricity from ESDM Ministry, Jarman, responding to the request form the Vice Chairman of the Indonesian Chamber of Commerce, Natsir Mansyur that the Government provides the electricity solution for the mining industries.

The Mining Law No 4 year 2009 prohibit the exportation of raw mineral overseas by 2014. This has caused many mining companies to scrambled and build smelters so they can process the material. The problem is that even with the current load, there is not enough electricity available. This has caused mining companies to potentially double dipping their pocket to build smelters as well as the power generation for the smelter.

The Mining Law No 4 year 2009 prohibit the exportation of raw mineral overseas by 2014 forcing mining companies either together or by itself to built smelter processing facilities

The Mining Law No 4 year 2009 prohibit the exportation of raw mineral overseas by 2014 forcing mining companies either together or by itself to built smelter processing facilities

Jarman said that by constructing smelters in Java or Sulawesi, the mining companies will be better served anyway since those two areas has better infrastructures which will help the company operations as well as transportation.

There are currently 30 companies ready to comply with the Law and intending to build smelters for their mining. However, since building their own generation plant is more expensive than buying subsidized electricity from the Government, plus the investment cost for power generation, they have sought the government help to provide electricity for the smelters.

While waiting for the certainty regarding electricity for the smelters, a lot of mining companies intensified their mining effort before the regulation take effect. The mining output jumped out by an astonishing 800 percent compare to the year 2009.

A number of mining companies urges the Government to reconsider the smelter deadline. While they are all supportive the Government policy, it is feared that the 2014 deadline will have an unintended consequences of killing off the smaller mining operation which mostly owned by locals.

“I’m sure there will be no smelters ready to operate by 2014. The Government should be wise and understand the situation. They need to anticipate this so it doesn’t create loses” said President Director of PT Ena Sarana Energi, Naldy Nazar Haroen that owns large medium size coal concession in Eastern Kalimantan.

Haroen added that the 5 years time frame offered by the Government was not realistic. Not to mentioned the difficulties of small to medium operation when looking for bank loans.

“Investment required to build a smelter is huge, how are you supposed to build it when you don’t have fund” asked Haroen. Haroen regrets the stringent Government policy that was issued without any incentive to support it. “Local companies don’t get certainty while big foreign operation is facilitated” he closed.

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