Mining law deadlocked over status of existing contracts

The status of the existing mineral and coal contracts has become the main hurdle in the debates between the government and the House of Representatives on the mining bill.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Tuesday that the House wanted all the existing mineral contracts of work (CoW) and coal contracts of work (PKP2B) that have been given to foreign investors be converted into Mining Business Permit (Izin Usaha Pertambangan) once the bill is passed into law.

The government however wants the status of the contracts should be honored until they expire.

?A contract is a contract and must be honored,? Purnomo said.

Foreign investors favor CoW and PKP2B because these types of contracts provide them with certainty. The contracts are categorized as ?lex specialis? (special law) because they are issued after being approved by the House. The contracts specify the nailed-down taxes the contractors have to pay and protect them from any changes in fiscal policy throughout the contract period.

IUP is meanwhile similar to the ?Kontrak Pertambangan? or KP (Mining Permit), the type of contract awarded to local investors at present. An IPU does not need an approval from the House and the IUP holders pay taxes based on the prevailing fiscal regulation. (Alex)