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Indonesia's mining permit deadline draws criticism

Publication Date : 12-10-2012


A deadline set by the Indonesian government for the application of Clean and Clear status for mining permits (IUP) has drawn criticism from the Indonesian Mining Association (IMA), which represents major companies in the industry.

The Clean and Clear status, which under a new rule should be a prerequisite for an IUP, indicates that companies’ activities are in line with the government’s environmental policies, free from overlapping land rights, and in conformity with all tax and non-tax financial obligations.

Although IMA members would not be affected by the deadline due to their sheer size and the different legal framework in which they operated, executive director Syahrir Abubakar said that setting a time frame for applications would be counter productive and likely to draw heavy protests from thousands of small-and-medium sized companies.

Almost all 42 IMA members operated under a contract of work agreement with the government and thus were not bound by the IUP legal framework, Syahrir said.

“It’s fine when a company can’t get a permit because it failed to obtain a Clean and Clear status. But if mining companies cannot apply for a permit after December, there will be a strong reaction,” he said on Thursday.

According to the Energy and Mineral Resources Ministry’s director general for minerals and coal, Thamrin Sihite, out of the existing 10,638 IUPs, only 4,833 of them have already received Clean and Clear status.

Energy and Mineral Resources Deputy Minister Rudi Rubiandini said earlier this week that local mining firms must file the essential documents for applying for Clean and Clear status in December.

“We cannot allow the process to take such a long time. The government must be firm on this matter,” he said.

On top of the obligation to obtain the status, mining companies must also report their business plans in relation to a legal requirement to process raw minerals locally prior to exports.

The government encourages mining companies to build smelters or to supply their minerals to local smelting plants.

Rudi also said that there would be no leniency for local mining firms who refused to develop their minerals locally, either by building smelters on their own or joining with other companies to do so.

The creation of added-value products from raw minerals is required by the 2009 Mining and Coal Law, which stipulates that within five years of the law taking effect, Indonesia will no longer permit the export of raw minerals and will curb the exploitation of non-renewable natural resources.

To encourage faster adaptation to the requirements set out by law, the government introduced a new regulation in May, implementing a 20 per cent export tax for 65 types of raw minerals, excluding coal.

The provision also applies to coal.

“If they refuse to do so in the next two years and ask for more time, then how much time should we give? Years? Centuries?” he asked.

Rudi’s comments were also criticised by the IMA, who said that while they were not objecting to the plan, the government must understand that the plan was not realistic enough to be carried out in such a small space of time.

“We are not saying that we are objecting to the plan, we just do not think it is realistic,” said Syahrir.

Syahrir added that the government must realise that not all minerals would fit with the new regulation, citing zinc as an example.

According to Syahrir, local zinc mining company PT Dairi Prima Mineral could not be pushed to build a zinc smelting plant as their production capacity was not big enough to build a smelter.

Other factors that the government should have thought of were the power, infrastructure and financial considerations.


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