Presidential decree to allow direct mining royalty payment to local administrations

The government is currently processing a presidential decree to allow mining companies to pay directly to local administrations a portion of royalties that becomes their rights, according to the director general of general mining at the Ministry of Energy and Mineral Resources, Surna Tjahja Djajadiningrat

Surna said Minister of Energy and Mineral Resources Purnomo Yusgiantoro had sent a letter to President Abdurrahman Wahid about the direct payment of a portion of the mining royalties to local administrations, as requested by mining companies.

"Mr. Minister (Purnomo) has sent the letter to the President, but now, there is no response yet," he said over the weekend.

Surna said he shared the concerns of mining companies about the long-process in transferring royalty funds to local administration because the funds must first of all be paid to the Ministry of Finance, that would transfer the funds that belongs to local administrations to the Ministry of Home Affairs that later would distribute the funds to local administrations.

Such practices had caused concerns among local administrations, especially after the implementation of regional autonomy law.

Therefore, Surna said that his ministry wanted the funds to be paid to local administrations in a bid to reduce time.

"I hear the mechanism will be like that (that the mining royalties will be paid directly to local administration). Therefore, Mr. Minister has sent the letter to the President," he said.

The concerns about the long-process of transferring royalty funds to local administration arose when the government issued Government Regulations (PP) No. 104/2000 on fiscal balance between central and local administrations.

The Indonesian Mining Association (IMA) executive director Paul L Coutrier said as a result of the issuance of PP No. 104/2000, the chain of bureaucracy on the payment of royalties by mining companies to the government became longer than before.

According to PP 104/2000, mining companies are required to report the amount of mineral they have produced and royalties they have to pay to the Ministry of Energy and Mineral Resources. The Ministry will then pass the report to the Ministry of Finance that confirms the amount of royalties that have to be paid by mining companies.

After confirmation from the Ministry of Finance, the mining companies then pay their royalties to the central government, which later transfers to local administrations the portion that have become the rights of local administrations.

With this longer process, Coutrier said, IMA was concerned that local administrations would get their portion a bit late. "This situation makes us a bit worried because local administrations could be suspicious that the delay is made deliberate by mining companies." (*)