The Energy and Mineral Resources Ministry’s mineral and coal director general, Bambang Gatot Ariyono, said on Monday that the planned regulation was a follow up to a previous government regulation that gave a legal basis for permit modification in the mineral sector.

“Freeport [Indonesia] and Amman [Mineral Nusa Tenggara] already have a legal basis to [modify their permits] into an IUPK. Hence, we also need it [a legal basis] for PKP2B holders,” he said, referring to Government Regulation No. 1/2017 that regulates the conversion of mineral companies’ contract of work (KK) to the IUPK.

The new regulation will be a revision of Government Regulation No. 1/2017, and is the sixth revision to Government Regulation No. 23/2010 on the management of mineral and coal businesses.

Contract conversions for mineral and coal companies were stipulated in the 2009 Mining Law, with an article in the law stipulating that all mineral and coal companies that seek to continue operating in the country must convert their contracts — whether the KK of PKP2B — into the IUPK.

An IUPK requires, among other things, the permit holder to construct a smelter.

The ministry said the new regulation was being reviewed by the Law and Human Rights Ministry in order to align it to other and relevant regulations. Once the review is completed, it would then be submitted to President Joko “Jokowi” Widodo for approval.

“I expect that the whole process, until the regulation is issued, will be completed no later than the end of this year,” Energy and Mineral Resources Ministry legal bureau head Hufron Asrofi said on Monday.

The upcoming regulation also reportedly gives more time for miners to propose a contract extension, from two years to five years before their contract expires.

Bambang, however, said the new time frame was not yet definitive, but said the idea for such a measure is to give coal miners more certainty in their investment in Indonesia.

“It would boost investment volume [in the mineral and coal sector] by giving them certainty in terms of contract,” the director general said.

As of the third quarter, minerals and coal saw the lowest amount of investment compared to other sectors overseen by the ministry. Until September, the amount of investment in the mineral and coal sector stood at US$1.6 billion, or 25.8 percent from the full-year target of $6.2 billion.

Commenting on the government’s planned regulation, some mining experts have criticized the move.

Budi Santoso, a director at energy think tank the Centre for Indonesian Resources Strategic Studies, said the government should not extend the PKP2B when the contracts came to an end.

“[The government should instead] give the coal mines to state-owned companies like [state-owned mining holding company] Inalum or PT Bukit Asam, in order to ensure the supply of coal for electricity firm PLN,” he told The Jakarta Post in a text message on Monday.

Furthermore, natural resources law expert from Tarumanegara University, Ahmad Redi, acknowledged that the existing rule had yet to regulate the conversion of the PKP2B permits to the IUPK, but noted that the government should not get mixed up between conversion and extension.

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