As many as 60 coal contracts-of-work (PKP2B) and nine non-coal mining license (KK) holders have agreed to renegotiate six main points in their contracts with the government, the Energy and Mineral Resources Ministry announced on Tuesday.
The six main issues cover the size of mining areas, contract extensions, the amount of royalties to be paid, obligations to process raw materials in Indonesia, divestment and the utilisation of local goods and services.
The ministry’s director for minerals and coal, Thamrin Sihite, reported that for mining license holders, in addition to the nine companies, 23 others had partially agreed to renegotiate and five others still disagreed.
“The better progress was made among coal miners because none of them disagreed. Besides the 60 companies, the remaining 14 companies have partially agreed to renegotiate the six main issues,” he told a discussion session at his office in Jakarta.
He also revealed 13 mining firms (five mining license and eight coal of contract holders) were ready to sign amended contracts with the government in the near future.
The signing was actually scheduled this month, but due to several problems, the plan was delayed.
Among the companies are Bangun Benua Persada, Batu Alam Selaras, Iriana Mutiara Idenburg, Karaka Caraka Mulia, Kasongan Bumi Kencana, Paramarta, Selo Argokencono Sakti, Sumber Kurnia Buana, Tambang Mas Sable and Tanjung Alam Jaya.
However, none of the 13 companies are major mining companies like PT Freeport Indonesia, PT Newmont Nusa Tenggara and PT Vale Indonesia (Inco).
“We have also terminated one KK and two PKP2B holders. They are Tripa, Inti Tirta Prima Sakti and Sena Mas Energi Indo. They failed to fulfill investment commitments as proposed,” Thamrin said.
Actually, with the legal basis of the 2009 law, the government could force all mining companies to adjust their contracts; however, in practice, bringing such pressure to bear was difficult because the government’s bargaining position was weak, ReforMiner Institute mining expert Pro Agung Rakhmanto argued.
“The government is afraid the companies will stop their investments in the country. If that happens, the country’s revenues from the mineral and coal mining sector will drop significantly,” he told
The Jakarta Post.
The 2009 Law on Coal and Mineral Resources mandated that all mining contracts in the country have to be adjusted two years after the law was first enacted at the latest.
During the discussion, Thamrin also reported the progress of the reconciliation of mining permits (locally known as IUP) issued by regional administrations nationwide. He said as of February 27, there were 10,235 IUPs registered, yet only 4,151, or around 40 percent of them, had a “clean and clear” status, meaning that they were issued by adhering to proper legal
“IUP reconciliation is very important to figuring out the real numbers for our annual mineral and coal production. It will also be very useful to help us in determining how many mining inspectors need to be deployed in the field,” he explained.
“To motivate miners to report their IUPs and make them ‘clean and clear’, we plan to make classification of companies based on their obedience to the government’s regulations and publish it for the public.”
Newmont Nusa Tenggara president director Martiono Hadianto argued that the renegotiation process was not easy because it not only covered royalties, but also many other company obligations.
He suggested that the government improve legal certainty in the country.
“There are many overlapping regulations, starting from the minerals and coal law, forestry regulations and regulations issued by regional governments. We have made contracts with the central government and therefore all clauses must be respected,” he said.
In the renegotiation process, Martiono hoped that the government could listen to the aspirations of mining companies.