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Uncertainties cloud mine contract renewal
Coal miner PT Tanito Harum fell victim to legal uncertainty recently after its 20-year contract extension was withdrawn as a result of the government’s snail’s pace progress in issuing the legal basis for the contract renewal
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span>Coal miner PT Tanito Harum fell victim to legal uncertainty recently after its 20-year contract extension was withdrawn as a result of the government’s snail’s pace progress in issuing the legal basis for the contract renewal.
Tanito Harum, which has three coal mines in East Kalimantan, received a new contract from the government in January this year to replace its old contract, which ended on Jan. 4.
However, Energy and Mineral Resources Minister Ignasius Jonan said last week that the government had to revoke it because of a warning letter from the Corruption Eradication Commission (KPK).
“The letter basically instructed us to follow the 2009 Mineral and Coal Mining Law. Hence, the new contract for Tanito Harum is nullified. We revoked it just as the KPK wanted,” he said.
His statement came during a hearing with House of Representatives Commission VII overseeing energy on Thursday, last week.
When asked for further detail, KPK deputy chairman for prevention Pahala Nainggolan told The Jakarta Post on Monday that the letter said the current contract extension of Tanito Harum had no legal basis.
“We asked the energy minister to only issue permits in accordance with the prevailing mining law. [...] One of the articles in the law even stipulates the legal punishment [for violating it],” he said in a text message.
In short, the 2009 Mineral and Coal Mining Law does not recognize the coal contract-of-work (PKP2B) held by Tanito Harum, but only a special mining permit (IUPK).
However, the prevailing Government Regulation (PP) No. 1/2017, which was issued for the implementation of the law, has yet to provide a detailed legal basis for coal miners to alter their PKP2B contract to an IUPK, so the government needs to revise it again.
At least three details are lacking for coal miners in the PP, namely the requirements to propose a contract extension, the assurance that state revenue is greater and the limitation of working areas.
An upcoming regulation will also enable coal miners to propose a contract extension earlier than two to five years before a contract ends. The PP has not yet been revised.
There are at least seven other coal miners whose contracts are set to expire in 2020-2025 that are at risk from this policy uncertainty, namely: PT Arutmin Indonesia, PT Kaltim Prima Coal (KPC), PT Multi Harapan Utama, PT Adaro Indonesia, PT Kideco Jaya Agung and PT Berau Coal. All the companies operate under PKP2B contracts.
One of the issues that has caused the delay to the PP revision issuance is the government’s plan to insert an article that will limit the mining area of each mining contractor to only 15,000 hectares as stipulated in the 2009 mining law. If approved the limitation will reduce a large part of major miners’ mining area, which stands at about 30,000 ha on average.
Previously, kontan.co.id reported that the limitation was being pushed by the State-owned Enterprises (SOEs) Ministry to ensure that state-owned miners could play a bigger role in the country’s mining sector.
The limitation has been criticized by miners, such as Indonesia’s second-largest coal producer PT Adaro Energy’s president director Garibaldi Thohir, who insist that the management of the mining industry should be fair to all parties, without regard to their status as SOEs.
“I believe that the government as a regulator should be fair. There shouldn’t be a dichotomy between an SOE and a private firm. We have to cooperate with one and another,” he has said previously.
Miners have also responded with disquiet to the delayed issuance of the PP revision, saying that it could directly affect their market value.
Publicly listed coal miner PT Bumi Resources (BUMI), which is the majority owner of KPC and Arutmin Indonesia, said it would face more difficulties in raising bank loans without certainty on the extension of the mining contracts of its subsidiaries.
Jakarta-based mining research group ReforMiner Institute executive director Komaidi Notonegoro concurred that the government should speed up the issuance of the PP revision, saying that the industry’s business climate is at risk.
“Policy certainty is needed to maintain the business climate and the interests of stakeholders, so I think the government needs to immediately complete the revision,” he said.
