Bloomberg News

Indonesia Seeks to Raise Income From Coal, Mineral Producers

December 22, 2008

Indonesia, set to enact new laws to preserve its mining industry, plans to increase income from producers of coal and minerals to tackle the economic slowdown.

The government will review mining contracts within a year to find ways to increase state revenue, Purnomo Yusgiantoro, minister of energy and mineral resources, told reporters today in Jakarta. The government may increase taxes or royalties levied on the mining companies, he said.

The parliament passed a bill on Dec. 16, aiming to cap mining areas, ban ore exports after the first five years and allow the government to set aside land as “national reserves.”

“We’ll make efforts to ensure that companies are willing to increase” payments to the state, Yusgiantoro said.

Licenses will be issued for new projects instead of so-called Contracts of Work. All current accords will be honored and will have one year to adhere to the new law, the draft bill said.

Mining companies will need to submit production plans within a year and ensure that concession areas are being developed and used. The government may take back the concession areas or ask mining companies to invite other investors, Yusgiantoro said.

“We’ll see whether the planning is realistic,” the minister said. “We don’t want to see the areas not developed optimally.”

Bambang Setiawan, director general of minerals and coal at the ministry, said Dec. 17 the government won’t take back parts of existing mines under the new law.

The new bill, which will turn into law within three months, caps area for metal production at 25,000 hectares (61,776 acres) for each license and for coal at 15,000 hectares each. That compares with the government regulation in 2001 that limited area for coal contracts of work at 100,000 hectares and 250,000 hectares for other minerals.

To contact the reporters on this story: Leony Aurora in Jakarta at laurora@bloomberg.net; Naila Firdausi in Jakarta at nfirdausi@bloomberg.net.

To contact the editor responsible for this story: Teo Chian Wei at cwteo@bloomberg.net.


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