Controversies over KPC divestment continue

Controversies over the divestment of 51 percent share of large and profitable coal producer PT Kaltim Prima Coal (KPC) continued with more parties joining the fray. In a meeting with representatives from the central government, East Kalimantan administration and KPC, the sub-commission of the House of Representatives (DPR) for mining called on the conflicted parties to end their difference.

In a meeting on Monday, the House?s sub-commission called on the three parties to proceed with the divestment schedule as schedule. "The July 31 deadline for the divestment of KPC?s 51 percent stake should not longer be violated," it said as reported by Kompas.

The three parties, however, remained steadfast in their previous demand. The central government wanted part of the 51 percent stake, the provincial administration of East Kalimantan continued to demand to buy all the 51 percent share, while KPC refused to sell the stake if the provincial administration refused to drop its legal suit against the company?s shareholders.

The provincial administration, which feels it has the rights to control and manage its own natural resources, has demanded to buy the entire 51 percent stake. Its demand is however opposed by the central government through the Ministry of Energy and Mineral Resources and by KPC shareholders. Both want the divestment be put through an open and competitive bidding. The opposition has prompted the East Kalimantan administration to file legal suits against the ministry and KPC shareholders.

Due to pressure from the central government, the provincial administration then dropped its suit against the ministry, but maintains its legal action against KPC shareholders. The legal fight has become the main source of the delay in the KPC divestment.

Meanwhile a House member Husni Thamrin told Neraca daily that the central government should let the provincial administration to buy the entire 51 percent stake which would be divested by the existing KPC shareholders.

"The central government should instead give the opportunities to the local administration to give the utmost benefit of their own natural resources. It has been too long for provincial administration only to see their natural resources being exploited by outsiders. So give them the chance," he said.

According to him, it is enough for the central government to obtain part of royalties from the mining operation. Earlier reports said that the central government will be represented by state owned companies such as major coal producer PT Tambang Batubara Bukit Asam (PT BA) in buying the KPC shares.

"Why should the government ask PT BA to buy the KPC shares. I think it will be better to use the funds to finance the state budget. What makes confused is that PT BA intends to buy KPC shares while it is still ready to prepare its privatization in order to get fresh funds," he added.

KPC, which operates a large coal mining area in East Kalimantan, is equally owned by world mining giants Rio Tinto and BP. Under its contracts of works, the company?s shareholders are required to divest 51 percent of their shares to local investors. (*)