Indonesia ponders coal export tax -industry groups

JAKARTA Oct 13 (Reuters) - Indonesia, the world's top exporter of thermal coal, is considering an export tax on the power plant fuel, but implementation is unlikely and would face fierce opposition, industry groups said on Thursday.

Government talks involving the industry over an export tax for coal from Indonesia, which holds some of the world's richest mineral deposits, have been ongoing for several months, Supriatna Suhala, executive director of the Indonesian Coal Mining Association, told Reuters.

"It is still only an idea," said Suhala. "This is not a good sign for the investor."

He added that any export tax would hit foreign investors in Indonesian coal, after they had ploughed cash into projects, equipment and related infrastructure.

Indonesian energy ministry official Thamrin Sihite was unavailable for comment.

"An export tax is a very long way away," said Suhala. "First the government has to revise the law, then re-negotiate contracts -- so it cannot be implemented in the near future."

The coal export tax discussions are separate to the ongoing drafting of rules requiring miners to carry out minimum processing on minerals before export.

In an effort to support the domestic industry and add value to its coal exports, the Indonesian energy and minerals ministry is drafting a regulation that would by 2014 require coal producers to upgrade low-quality coal to a medium-quality coal before exporting.

The mining industry says Indonesia needs to delay the implementation of the planned regulation, to enable the much needed value-added investments to catch up.

"No decision has yet been made," said Singgih Widagdo, the director at the Indonesian Coal Society, referring to the export tax idea. "No figures have been issued yet.

"It's difficult because if the government wants to introduce an export tax, at the same time it is in the process of re-negotiating mining laws."

He said that major political parties would be opposed to such a tax on coal exports.

"It's not easy for the government to draft an export tax, during the (2014) re-negotiation process is still running," he said, adding that he didn't believe it would ultimately happen.

Indonesian output will hit 340-354 million tonnes for 2011, industry groups say, and is seen rising at least 10 percent annually over the next five years to lead global growth in thermal coal exports and meet rising demand from China, India and South Korea.

The archipelago of 17,000 islands produces mainly low-grade coal, used predominantly in emerging markets, with Vietnam seen as an up and coming big consumer.

Southeast Asia's largest economy currently has an export tax for both cocoa and palm oil, in an effort to maintain domestic supplies and encourage lucrative downstream industries. (Reporting by Michael Taylor; Editing by Ramthan Hussain)