Monday, 16 September 2019

Govt to Raise Mining Royalties

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  • Mining equipment is seen inside the vast open pit of the Batu Hijau copper and gold mine, run by Newmont Mining Corp, Sumbawa island. REUTERS/Neil Chatterjee/File Photo

    Mining equipment is seen inside the vast open pit of the Batu Hijau copper and gold mine, run by Newmont Mining Corp, Sumbawa island. REUTERS/Neil Chatterjee/File Photo

    TEMPO.CO, Jakarta-The Ministry of Energy and Mineral Resources will raise mining royalties from mines managed by contracts of work (CoW) holders next year. The government will assume that all mining renegotiation processes have been completed, thus all amendments are final.



    "It's time to raise it," the Energy Ministry's spokesman Sujatmiko said yesterday, July 17, 2016.

    The government plans to raise gold royalty from the current 1.0 percent to 3.75 percent. Copper royalty will be raised from 3.75 percent to 4.0 percent, silver from 1.0 percent to 3.25 percent, nickel from 0.9 percent to 2.0 percent, and metals from 0.7 percent to 1.5 percent.

    Sujatmiko said the government actually wanted the royalty hike to happen this year, but the contract renegotiation was stuck on a clause for additional state revenues. The government requested for a prevailing fiscal agreement in the contract, which means that it may be adjusted in accordance with applicable regulations. But mining companies wanted a fixed fiscal deal.

    If the new rates apply, Sujatmiko guaranteed that the withdrawal scheme will clear and well-planned. To that end, the Ministry has established a special directorate to charge admissions from the mining sector. The directorate is also tasked to the planning, management, implementation, and monitor the royalty payments.  

    In Indonesia there are currently 107 mining contracts consisting of 34 CoWs and 73 Coal Business Contracts (PKP2B). The CoW holder that has agreed to the revision is Vale Indonesia Tbk.  A total of 22 companies agreed with the PKP2B amendment, but "there are no plans to raise coal royalty for PKP2B holders," Sujatmiko said.

    Budi Santoso, a mining analyst from the Center of Strategic Studies Resources Indonesia, said that a mineral royalty hike will do little to increase state income. In 2017, he projected, the prices of mineral commodities in global markets will still be low. He said that the low prices will make it impossible to complete the contract renegotiations by next year.

    He suggested the government to seek other revenue-raising alternatives, such as by optimizing the use mineral commodities by local industries. "The issue of receivables must also be completed," he said.

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