The government may be running out of time in its quest to revise 102 mineral and coal contracts by 2017 as dozens of mining firms remain reluctant to comply with prevailing tax and duty laws.
This will consequently hamper the state from boosting its revenue from the extractive industry in years to come.
The government has amended only 50 coal contracts of work (PKB2B) and 20 mineral contracts of work (CoW), with the addition of 13 coal miners who finally agreed to change their contracts on Tuesday – after lengthy negotiations that began in 2010.
Overall, the government hopes to amnd 68 coal contracts and 34 mineral contracts before year-end to meed a 2009 Mining Law mandate, which proposes a shift of the decade-long mining regime based on “contract” to “permit” to give the state the upper hand.
The law stipulates that holders of coal and mineral contracts can continue their mining operations until their contract expire, but it also requires them to revise those contracts in accordance with existing regulations in order to jack up state income.
Miners can then only extend their operations in the country if they agree to convert their old contracts into special permits (IUPK).
“At present, there are still 18 PKP2B and nine CoWs that have yet to amended, “Bambang Gatot Ariyono, the Energy and Mineral Resources Ministry’s director general for mineral and coal said on Tuesday. “Almost all of those miners have yet to agree on clauses related to state income, especially on reimbursement and coal as a tax subject.”
The amendment will require miners of three-generation contractsto pay coal production fees (DHPB) totaling 13.5 percent in cash. Previously, a number of miners paid the fees in kind with their output under a wide range of percentages.
Meanwhile, first generation miners who signed their coal contracts during the 1981-1990 period will see their land rent payments increase to US$4 per hectare from $1 per ha. They will also have to store higher lump sum payments.
“The amendment of these 13 PKP2B will bring an additional state income of $68 million per year,” said Bambang, adding that the biggest contribution would come from land rent and lump sum payments.
Meanwhile, Energy and Mineral Resources Minister Ignatius Jonan said he would try to expedite negotiations with miners who had yet to amend their contacts in order to meet the deadline. This contradicts with his previous statement, in which he said the government would not force a contract amendment if that could prevent miners from continuing their operations.
Jonan also reiterated that all miners should place deposits into the reclamation-guarantee fund, which would be used for post-mining rehabilitation activities to nsure sustainable mining.
“If they haven’t made their deposits for post-mining activities, I will reject their mining permits,” he said.
As of September, 48 percent of a total of 9,730 permit holders in the country have made their deposits to regional administrations. Of the overall figure, only 6,058 were granted a “Clean-and-Clear” (CnC) status, which acknowledges their compliance with environmental policies as well as tax and non-tax financial obligations, in addition to absence of overlapping land rights.
As of the second week of November, non-tax revenues from the mineral and coal sector reached Rp 34.4 trillion ($2.54 billion), surpassing the full-year target of Rp 32.7 trillion.
The positive result was triggered by a hike in global coal prices, thanks to China’s efforts to curb its domestic supply amid surging demand, as well as disrupted production in major producers, Australia and Indonesia.
Source: Viriya P. Singgih/ The Jakarta Post
16 November 2017