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Jakarta Post

Coal barons win

  • Editorial Board

    The Jakarta Post

Jakarta   /   Thu, May 14, 2020   /   08:21 am
Coal barons win

Indonesia’s coal barons have won on almost all counts of the interests they have been fighting for over the past four years. The central government has regained full control over mineral resources, with regional administrations stripped entirely of their authority in mining licenses. These are some of the crucial revisions to the 2009 Mining Law that the House of Representatives approved on Tuesday for immediate effect.

We support returning the mineral licensing authority to the central government, as many corruption cases involving local leaders concerned mining concessions. Past cases show that many regional heads attempted to milk their licensing authority, especially to raise funds for election campaigns.

The biggest beneficiaries are certainly those companies holding the six or seven first-generation coal mining contracts that expire in the next three years. These companies were also the most aggressive in lobbying the government and the House on the Mining Law revisions.

The revised law relieves them from the provision in the 2009 Mining Law that requires them to return these concessions to the government on contract expiry. They are also guaranteed two 10-year contract extensions and may retain their concessions, which range from 30,000 hectares to over 120,000 ha; the 2009 Mining Law restricted new concessions to a maximum 15,000 ha.

The government deemed the revisions as urgent, regardless of COVID-19 and the attendant public health, social and economic crises. The main argument and rationale are that mining is long-term by nature, and the holders of first-generation coal contracts need legal certainty over their concessions at least two years before contract expiry, so they have adequate time to prepare investment plans.

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Moreover, most of these contract holders are coal giants contributing almost 40 percent to the national output of 600 million tons annually, and supply 70 percent of state-owned electricity company PLN’s coal needs. Production disruptions at their concessions due to legal uncertainties would also hurt state revenues in mining taxes and royalties, and potentially cause mass layoffs.

We believe civil society organizations and environmental NGOs will challenge the revisions through a judicial review petition with the Constitutional Court, especially regarding the guaranteed contract extensions and the concession size. But a judicial review would not annul the law as a whole, only the revised provisions.

Still, we think, the revised law is no carte blanche for the big coal mining firms because the legislation still stipulates safeguards to keep mining companies on their toes. Strict administrative, financial, technical and environmental terms and requirements still apply to the awarding of 20-year coal mining permit, the contract extension guarantee and concession size. Technical details on the rules for the enforcement of the law will still be ironed out in presidential regulations and ministerial instructions.

We believe, in good faith, that the government will address most issues of public concern in the implementing regulations so that the management of our natural resources will truly serve the interests of the people and are economically, socially and environmentally sustainable.