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New mining law draft offers incentives

Lawmakers have targeted to complete the revision of the 2009 Mining Law by July at the latest, the new stipulations of which include several fiscal and non-fiscal incentives for miners committed to boosting the country’s mineral and coal downstream businesses

Viriya P. Singgih (The Jakarta Post)
Jakarta
Thu, March 22, 2018

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New mining law draft offers incentives

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awmakers have targeted to complete the revision of the 2009 Mining Law by July at the latest, the new stipulations of which include several fiscal and non-fiscal incentives for miners committed to boosting the country’s mineral and coal downstream businesses.

Satya Widya Yudha, the deputy chairman of House Commission VII overseeing energy and mining, said on Wednesday that his commission had submitted the draft revision to the Legislation Body (Baleg) to be harmonized.

After Baleg has completed the harmonization process, the bill will be taken to a House plenary session before being submitted to President Joko “Jokowi” Widodo. Lawmakers will later decide whether they will establish a working committee or special committee to deliberate the bill along with the government.

“We hope the deliberation with the government could start within the next month. If we can do that, we aim at completing the revision and enact the new law by June or July at the latest,” Satya said, adding that the discussion with the government must be completed within two sessions as stipulated in the 2018 Legislative Institutions Law.

Various changes will be introduced through the revision, the March 7 draft of which was obtained by The Jakarta Post. The revisions include the decision to return the authority to manage the country’s mining permits from regional administrations to the central government as previously mandated in the 2014 Regional Autonomy Law.

The draft also stipulates several incentives for miners committed to being involved in integrated processing of mineral and coal.

For instance, mineral and coal miners that have integrated their operations with processing and refining facilities or with coal-fired power plants will be granted a mining license for production (IUP-OP) for a maximum period of 20 years. The license will then be directly extended for another 20 years, with a possibility for renewal once again for 10 years.

Furthermore, holders of the IUP-OP that develop and operate such facilities or power plants themselves will get non-fiscal incentives, including exemption from a reduction in their mining area when they extend their operations.

If the mining companies holding the IUP-OP are mostly owned by foreign investors, and they have integrated operations from upstream to downstream, the owners will be allowed to divest their majority stake after 10 years of mining operations, while the current stipulations oblige them to divest after five years of production.

Meanwhile, holders of mineral contracts of work and coal mining agreements that have amended their contracts and integrated operations from upstream to downstream will get a 20-year new license to operate in the country with a possibility to be renewed for two times for 10 years each.

Miners, including ones holding old contracts or new licenses, that have conducted processing and refining will be allowed to export their downstream products in certain volumes for a maximum period of two years.

“Through this revision, the House aims at ensuring miners will comply with mandates to boost the downstream sector, while trying to lure investment to boost the country’s industrial growth,” Satya said.

The draft revision also formalizes the presence of a state-owned mine holding firm, while mandating the government to establish a dedicated mining data and information center.

Bambang Gatot Ariyono, the Energy and Mineral Resources Ministry’s mineral and coal director general, welcomed the House’s efforts to boost the mineral and coal downstream sector through a number of incentives.

“We will certainly give a nod if such incentives are aimed at boosting the country’s mining sector,” Bambang said.

Bambang expected that the 2009 Mining Law revision would legalize the operations of junior mining companies specializing in exploration.

The law currently requires mining license holders to undertake all mining activities in the field themselves, from exploration to exploitation.

“Later, we will allow junior miners to only conduct exploration. If they are able to find [mineral or coal] reserves that are economically feasible to extract, the reserves will be exploited by other mining firms that have stronger financial capabilities,” Bambang said.

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