* New trade rules aimed at illegal operators
* But legitimate firms say cash flow will suffer, firms will
* Coal association speaking to govt, wants delay to new
* Hopes for sympathetic review by incoming administration
(Recasts with call for review of rules, quotes, context)
By Fergus Jensen and Michael Taylor
JAKARTA, Aug 26 Indonesia's coal industry is
pushing the government to roll back new trade rules that it says
will drive firms into the ground and rule out any chance of
higher shipments next year from the world's top exporter of
The rules, intended to rein in illegal operations, force
coal miners to register with the central government and make
royalty payments upfront before they are allowed to export.
But the change - coming as the Southeast Asian country
pushes to limit coal output to safeguard future energy needs -
is piling pressure on a sector that faces at least another year
of depressed prices because of a global oversupply, the
Indonesian Coal Mining Association said.
"A lot of companies will die because of cash flow problems
... The full impact will be seen in 2015. Usually the (export)
number is always increasing significantly, but this will stop
that," Bob Kamandanu, chairman of the association, told Reuters.
He expected coal exports of around 350 million tonnes in
2015, broadly the same as this year.
"They are trying to kill the rats but they are killing the
chicken that laid the golden egg," Kamandanu said. "I'm trying
to convince the government that this will kill everyone."
However, according to Sukhyar, Indonesia's director-general
of coal and minerals, the new export rules would have a minimal
impact on shipments. "Perhaps a little, but not major," he said.
The price of Asian benchmark Newcastle coal has
dropped around 20 percent this year, hitting $69.27 a tonne in
the week to Aug. 22, its lowest level since late 2009, due to
worries about growth in demand from China.
DISPUTES WITH MINERS
According to the coal association, the new export rules
would contravene contracts signed with the government by miners
that account for about two-thirds of national output.
The government already faces international arbitration over
a separate rule restricting mineral exports introduced in
January that U.S.-based Newmont Mining Corp has said is
in breach of its contract. Fellow U.S. miner Freeport McMoRan
Inc had also challenged the rule but reached a deal with
the government last month.
The association hopes the administration of president-elect
Joko Widodo, due to take office on Oct. 21, will review coal
policy, said Pandu Sjahrir, who chairs its commercial committee.
"We are talking with the current trade minister to suggest
they wait until the next government because obviously this is
very contentious," he said.
"Once you get a very strong team, people who truly
understand the industry, that should be helpful because they
know the pain we go through," Sjahrir said, adding he saw no
reason for the new government not to roll back the rule.
Last week the government announced it would delay
implementation of the regulation by one month from Sept. 1 after
only a handful of firms registered.
"The backlog is quite significant," Sjahrir said, noting
that smaller firms would find it more difficult to get
government approval. "Getting those signatures is not very easy,
even if you've complied with everything."
Data on Friday from the Financial Services Authority (OJK)
showed that non-performing loans to the mining sector had more
than doubled to 2.49 percent in June from 0.99 percent a year
before, showing the impact of the downturn in prices.
Banks have been cutting exposure to the sector, with loans
to the mining sector growing by 6.97 percent over the same
period, whereas overall credit grew 17.2 percent.
The coal association says it was taken by surprise by the
changes to the royalty payment structure, which would add to
members' cash flow problems.
"Effectively you are financing the government a month ahead,
and that will affect cash flows for all businesses," Sjahrir
Previously firms only had to pay royalties to the government
after their coal had been handed over to a customer and some
could pay up to three months after transactions, he said.
(Reporting by Fergus Jensen, Michael Taylor and Wilda Asmarini;
Additional reporting by Yayat Supriatna and Gayatri Suroyo;
Editing by Alan Raybould)