ID/Damiana Ningsih Simanjuntak
National petrochemical company Chandra Asri is increasing its planned investment by 17.24 percent to $170 million to build a butadiene plant in Cilegon, Banten, an Industry Ministry official said.
Harris Munandar, the head of the research center on policies and industrial climate at the Industry Ministry, said that the increase in investment was aimed at meeting the minimum investment size to obtain a tax holiday.
“In documents submitted earlier, Chandra Asri included its working capital so that the real investment was less than Rp 1 trillion [$106 million]. After the sum was raised, the real investment amount now meets the requirement to apply for a tax holiday,” Harris said on Wednesday.
The Finance Ministry issued a decree this year that regulated requirements for the corporate income tax elimination. It stipulates that companies in the petrochemical sector can obtain a tax holiday if they invest a minimum of Rp 1 trillion, excluding their working capital.
In the earlier application, Chandra Asri proposed an investment of $145 million, but that included the working capital.
Chandra Asri said the additional investment of $25 million would be used to increase production capacity, including the purchase of new machinery.
Chandra Asri started building the butadiene plant in January and it is expected to be in operation by next year. It will be designed with an initial capacity of 100,000 tons per year. The capacity will be increased to 150,000 tons per year.
The plant will be managed by a subsidiary, Petrokimia Butadiene Indonesia. Butadiene is a raw material for the production of styrene butadiene rubber, acrylonitrile butadiene styrene and styrend butadiene latex, all materials used in automotive and tire production.
Suhat Miyarso, Chandra Asri’s vice president for corporate relations, expressed hope that the revised investment amount would make the project eligible for a tax holiday.
Suhat hoped the tax holiday would be given since it would make it easier for the corporation to get a faster return on its investment.
“We are optimistic that we can get the tax holiday. If it is approved, the return of investment will be fast and this will help the company’s cash flow so that it can support the plan to build factories downstream,” Suhat said.
The company’s demand for a tax holiday was for a period of 10 years and added that the entire butadiene production would be for domestic industries.
“Four or five companies have expressed the desire to cooperate, but we have to see which is the best one,” Suhat said.