Amid Indonesia’s ongoing development, the demand for energy—particularly from coal—has significantly increased. Recognizing the importance of maintaining national energy security, there is an urgent need to develop the coal gasification industry. This industry is expected to provide an effective solution to meet the public’s coal energy needs. However, in reality, the development of the coal gasification industry in Indonesia still faces challenges and has not yet reached the desired optimal level.

This statement was delivered by Dr. Ragimun during his Doctoral Promotion Session at the Postgraduate Program of the Faculty of Administrative Sciences, Universitas Indonesia (FIA UI), on Monday (December 19, 2023) at the EDISI 2020 Auditorium, M Building, FIA UI. Dr. Ragimun presented his dissertation titled “Analysis of Fiscal Incentive Policies for the Coal Gasification Industry in Supporting National Energy Security.”

“The coal gasification industry in Indonesia has not yet developed optimally due to various obstacles. These challenges include high capital expenses (Capex) and operational expenses (Opex), the significant investment required for gasification technology, and the lack of maximum government support—particularly in terms of fiscal incentives for coal gasification industry investments. To address these issues and promote the development of this industry, alternative fiscal incentives and financing schemes need to be implemented,” he explained.

Through this research, Dr. Ragimun aimed to analyze the development of the coal gasification industry, evaluate alternative fiscal incentive policies to encourage growth, and examine the implications of fiscal incentives on national energy security. He employed a mixed-methods approach, combining qualitative and quantitative research using Benefit-Cost Analysis (BCA) and an Input-Output (IO) model for a comprehensive analysis.

“Providing fiscal incentives for the coal gasification industry is expected to accelerate economic growth, increase tax revenue, and create jobs. Based on the findings, it is recommended that the government offer greater fiscal incentives, encourage business collaboration between companies, and explore climate change financing schemes to support the coal gasification industry. These measures will expedite the operationalization of the coal gasification industry. Some suggested fiscal incentive schemes include a 0% coal mining royalty, tax allowances, tax holidays, exemptions from import duties (BM), VAT deferral, and special economic zone (SEZ) facilities,” he elaborated.

Dr. Ragimun also outlined several alternative fiscal incentive policies that the government could adopt to support the coal gasification industry in Indonesia. One such alternative is business collaboration, where multiple companies with coal resources partner to share the investment burden. Another option involves funding through trust funds or climate change financing to provide additional capital for industry development.

“The multiplier effect of fiscal incentive policies on the coal gasification industry is significant. According to simulation and economic data analysis, fiscal incentives—such as a 0% royalty, tax holidays, and fixed coal prices at the mine mouth—can improve the economic viability of coal gasification investments. These incentives can increase the Net Present Value (NPV), enhance the Internal Rate of Return (IRR), and shorten the payback period for investors,” he added.

Based on the Input-Output (IO) model simulation, Dr. Ragimun explained that fiscal incentives for the coal gasification industry would have widespread economic implications. These include boosting national GDP and regional GDP (PDRB) in South Sumatra—where the coal gasification industry is located—enhancing future tax revenues such as income tax (PPh) and value-added tax (VAT), and creating new employment opportunities.

During the Doctoral Promotion Session, Dr. Ragimun became the 36th doctorate recipient from the Faculty of Administrative Sciences and the 224th doctorate in Administrative Sciences, earning a “Highly Satisfactory” distinction.

The session was chaired by Prof. Dr. Chandra Wijaya, M.Si., M.M., with Prof. Dr. Haula Rosdiana, M.Si. as the Promoter, and Dr. Milla Sepliana Setyowati, M.Ak. as the Co-Promoter. The examination committee included Dr. Machfud Sidik, M.Sc., Prof. Dr. Irfan Ridwan Maksum, M.Si., Prof. Dr. Gunadi, Dr. Ning Rahayu, M.Si., and Dr. Inayati, M.Si.