This content is from: Local Insights

Revision of the mineral and coal mining services business in Indonesia

Freddy KaryadiOene Marseille
The Indonesian government has issued a revision of the mining and coal mining business services regulation through Regulation of the Minister of Energy and Mineral Resources No. 24 of 2012 (which amends Regulation 28/2009).

The revision provides a list of sub-fields of mining business service (Usaha Jasa Pertambangan), such as the field of general survey which may have sub-fields consisting of reconnaissance, remote sensing, and prospecting. There is also a detailed list of non-core mining business licences (Usaha Jasa Pertambangan Non Inti), such as civil construction and health.

The holder of a mining business licence (Izin Usaha Pertambangan, or IUP) or special mining business licence (Izin Usaha Pertambangan Khusus, or IUPK) may engage in mining services after its working plan is accepted by the Minister of Energy and Mineral Resources, governor or regent/mayor. Further the holder of an IUP or IUPK is obliged to use or prioritise a local mining service company and/or national mining service company. If there is no local and/or national mining services company which has met the classification and qualification required by the holder of the IUP or IUPK, the holder may use another mining services company (PMA Company) after it has made an announcement at the local and/or national newspapers.

The holder of the IUP or IUPK Production Operation must conduct its own mining. However, it may grant the mining business to the mining services company limited to the stripping of overburden rocks.

In the framework of local community development and empowerment, optimised utilisation, and alluvial tin mineral resources conservation, the IUP or IUPK holders in the form of state-owned entities or region-owned entity, upon obtaining approval from the Minister, in the excavation of alluvial tin deposit, may refer their works to local mining services companies and/or the community living around the mine through partnership programmes.

Underground mine IUP and IUPK holders, in the making of tunnel/shaft access to vein ore/seam coal, drainage, and ventilation, may refer their works to mining services companies in the field of mining construction, subfield of tunnelling

Additionally, IUP or IUPK holders may use equipment owned by a company holding a SKT by means of a heavy equipment lease mechanism.

In this regulation, "qualification" means the categorisation of mining business service pursuant to the financial capability of the company. Before the amendment of this regulation, the qualification was divided into only two types: small qualification and large qualification. After the amendment, the qualification now consists of: small qualification; ii) medium qualification; and iii) large qualification.

A mining service company can conduct its business if it has obtained a mining service business licence (Izin Usaha Jasa Pertambangan, or IUJP) from the Minister or governor, or regent/mayor. A mining service company that provides continuous non-core mining business services at the mining location can conduct its business activities if it has obtained a registration certificate (Surat Keterangan Terdaftar, or SKT) from the Minister or governor, or regent/mayor. Each IUJP and SKT is valid for five years; an amendment can be applied for no earlier than six months after the issuance.

An IUJP that intends to use foreign manpower must obtain a permit from the Ministry of Manpower and Transmigration or a designated official. Approval from the competent Minister, governor, or regent/mayor must first be obtained in order to obtain such permit.

The amended Regulation 28/2009 introduces some new obligations for IUJP and SKT holders, including:

  • prioritising domestic products;
  • prioritising local sub contractor in accordance with their competence;
  • prioritising local employees;
  • delivering every mining services document held by the IUP or IUPK holder to Minister, governor, or regent/mayor; and,
  • running society development and empowerment programmes including the development of education and training, health and the local economy.

The prescribed forms of the quarterly and annual reports are also attached to the amended Regulation.

There are some provisions on what conditions may be imposed on the holder of an IUJP or SKT by administrative sanctions from the Minister or governor or regent/mayor. Sanctions can be imposed for not returning an operational report for three quarters and/or annual reports on the performance of activities within 30 business days after the end of the period three consecutive times; and for assigning the IUJP or SKT to another party.

Administrative sanctions can be in the form of a written warning, a temporary suspension for up to two months which may be revoked once the holder has managed to comply with all of its obligations, or revocation of the IUJP or SKT.

Under transitional provisions, an IUJP that has been issued before the enactment of the amended Regulation 28/2009 will be valid until its expiration date and will be adjusted with the provisions in the regulation. Further, the holder of a mining authorisation (Kuasa Pertambangan), contract of work (Kontrak Karya) and coal contract of work (PKP2B) which has engaged a mining service company based on the previous regulations will be adjusted to be accordance with the provisions in the amended Regulation 28/2009 at the latest three years after the enactment of the Regulation (by September 30 2012).

Oene Marseille and Freddy Karyadi

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