The coal business has been booming since the early 1990s. Indonesia’s coal production rose from a mere 13 million tons in 1991 to more than 606 million tons in 2021. Who gets the biggest share?
In Indonesia, coal has long been exploited to satisfy the avarice of those in power.
Prior to the country’s independence, in 1861, the Dutch colonial government began mining coal in Palaran, East Kalimantan, before kicking off production in Ombilin, West Sumatra, the year after.
In fact, Kalimantan and Sumatra islands are Indonesia’s “supermarket” of coal. As of 2020, coal reserves on the two islands reached 25.84 billion tons and 12.96 billion tons, respectively, while their coal resources stood at 88.31 billion tons and 55.08 billion tons.
In 1976, then Indonesian president Soeharto issued a decree to prioritize the rehabilitation of mining facilities to boost national coal production. Global coal demand was on the rise following the 1973 Arab oil embargo.
However, the real momentum came in the early 1990s after Soeharto reopened Indonesia’s coal mining sector for foreign investment. Ever since, the country’s annual coal production kept soaring from one year to another, from merely 13 million tons in 1991 to 606.7 million tons in 2021.
By the end of 2021, there were 66 coal miners operating in Indonesia under the old system of work contracts (PKP2B) and 1,162 under the more contemporary mining business permits (IUP).
Indonesia uses its own coal to fuel steam power plants and various domestic industries. As of 2021, the capacity of the nation’s power plants reached 74 gigawatts (GW), of which 37 GW, or 50%, came from coal facilities. Indonesia needed a total of 113 million tons of coal to operate all of its steam power plants.
Based on the US Energy Information Administration (EIA) calculations, every million tons of coal burned emit up to 3.17 million tons in carbon dioxide, meaning that Indonesia’s coal facilities could release 358 million tons of CO2 in 2021.
Coal burning generates a large quantity of harmful pollutants and chemicals. According to a 2015 study by Harvard University and Greenpeace, Indonesia’s coal power stations caused an estimated 6,500 premature deaths annually. The number was projected to increase to 15,700 in line with the development of new coal facilities across the nation.
Moreover, coal mining activities pose a threat to health and environment. Examples include Muara Enim, a regency with the largest coal reserves in South Sumatra, where state-owned coal miner PT Bukit Asam mainly operates. There, rivers are polluted, floods and landslides occur routinely, forest areas and agricultural lands are shrinking, land conflicts are common, illegal mining is everywhere, and locals are vulnerable due to the poor quality of their health.
In spite of all this, Indonesia today still puts a premium on coal, which is seen as the cheapest energy source. The coal business is deemed essential by the government, as it helps boost non-tax state revenue and ease the country’s trade deficit. And, certainly, it makes the rich richer.
The presence of a number of coal oligarchs with strong networks and political influence in the government led to a policy flip-flop on some crucial energy and mining measures in the past several years. The government canceled a plan to cap annual coal production at 400 million tons starting in 2019. It also backtracked on the coal export ban within less than two weeks after the policy was announced at the end of 2021.
As of 2020, Indonesia’s five biggest coal holding companies or business groups were PT Bumi Resources, run by the Bakrie family, Sinar Mas Mining Group, owned by the Widjaja family, PT Adaro Energy, controlled together by the Thohir and Soeryadjaya families, PT Indika Energy, steered by the Sudwikatmono family and PT Bayan Resources, led by Low Tuck Kwong. State-owned mining holding firm Mining Industry Indonesia (MIND ID) only sat sixth place. The list is based on data from the Energy and Mineral Resources Ministry, annual reports and official websites of numerous mining firms, as well as information published by various news outlets.
At least eight oligarchs now control those six coal business groups, namely Aburizal Bakrie, Fuganto Widjaja, Sandiaga Uno, Edwin Soeryadjaya, Garibaldi “Boy” Thohir, Erick Thohir, Agus Lasmono, and Low Tuck Kwong. In addition, there are other businessmen with relatively low coal production volumes, yet with strong networks in circles of tycoons, politicians, military officers, and government elites. They are Prabowo Subianto and Luhut Binsar Pandjaitan.
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Researchers: Viriya Singgih, Mawa Kresna
Translator: Sebastian Partogi
Editors: Mawa Kresna, Evi Mariani, Sam Schramski (EJN)
This article is part of the #EnergiKotor (#DirtyEnergy) reporting series supported by Internews’ Earth Journalism Network through its special collaborative journalism project “Available But Not Needed,” which brings together six media outlets and more than a dozen reporters across seven countries to explore how public and private investments continue to fund fossil fuel economies in Southeast Asia.