State to gain greater revenue from amended mining contracts

Petromindo|Thomas

The state stands to gain greater revenue from the coal and mineral sector following the completion of amendment of dozens of mining contracts.

Director General of Mineral and Coal at the Ministry of Energy and Mineral Resources Bambang Gatot Ariyono said on Wednesday that under the amended mining contracts, the financial obligations of the miners including royalty and tax will be based on prevailing regulation system instead of the nailed-down system as set under the old contracts.

As such, the state stands to gain greater revenue if the government decides to increase the tax rate or royalty as the miners are ready to adjust to prevailing regulations.

Bambang was speaking following the signing of the amendment of mining contracts of 27 miners, comprising of 12 mineral mining firms holding the mining contract of work (KK) and 15 coal mining firms holding the coal contract of work (PKP2B).

He said that state revenue from the amendment of 12 KKs and 15 PKP2Bs is projected to increase, respectively by 7 percent and 23.5 percent.

He said that potential increase in the state revenue from KK mineral miners comes from mining royalty, land rent, and land and building tax (PBB). From the PKPB2 coal miners higher revenue comes from royalty, land rent, PBB, valued added tax, and coal production fund of 13.5 percent which was previously in the form in-kind but has now been changed to in-cash form.

There were a total of 102 KKs and PKP2Bs that must be amended as stipulated by Law No 4 Year 2009 on Coal and Mineral Mining. The amendment of 31 contracts (9 KKs and 22 PKP2Bs) were signed in 2014 and 2015, according to the ministry in a statement. With the signing on the amendment of another 27 contracts on Wednesday, the total number of contracts which have been amended increases to 58 contracts, comprising of 21 KKs and 37 PKP2Bs.

Minister of Energy and Mineral Resources Ignasius Jonan said the ministry wants to conclude the amendment of the remaining contracts this year. The government has been struggling to push miners to amend their contracts to comply with the stipulations set in the 2009 Mining Law, supposedly to be concluded by end of 2010. He said he will report to President Joko Widodo and ask direction on what actions to be taken toward the remaining miners which have yet to amend their contracts.

In the amendment, contract adjustment is made on six strategic issues namely concession areas, extension of mining operations, state revenue, domestic process and refining obligation, mandatory share divestment, and obligation to use local workers, and domestic goods and services. (*)