Moving one step closer to the wrapping up of the deliberations on the mining bill, lawmakers and the government clinched a deal Wednesday on a special scheme, similar to the current contract of work (CoW) arrangements, for major mining projects.
This means that there is now only one contentious issue left to be ironed out -- the transition period during which existing CoW holders must bring their mining operations into line with the new system envisaged by the bill.
Wednesday's agreement ends weeks of intense discussion of what would succeed the CoW scheme, which had divided the House of Representatives' committee deliberating the bill.
The original version of the bill envisaged an end to the existing CoW scheme and its replacement with a new licensing system under which investors would have to secure permits either from the central government or local government, depending on the extent of the proposed mine, before they could commence operations.
Critics said the new system failed to provide a level playing field for the miners, arguing that a permit, instead of contract, would put companies in an inferior position as the government could revoke the permit at any time.
It was the Golkar Party faction, which has the largest number of seats in the House, that first raised the idea of issuing special permits, similar to CoWs and to be known as mining agreements, for projects worth at least $250 million.
These agreements will be issued by an agency to be established after the enactment of the new legislation. Meanwhile, mining permits for projects worth less than $250 million will be issued by local governments.
"We have decided to accept Golkar's suggestion. So, despite the licenses that will be awarded to new (small) mining operations, there will also be special permits issued to big investors," Sony Keraf, the chairman of the House committee deliberating the bill, said Wednesday.
Not only will a project need to be large in order to be eligible for a mining agreement, but the minerals to be mined will need to be of major strategic value, such as copper, nickel and gold, according to Erlangga Hartarto, a Golkar legislator.
Erlangga added that before securing a mining agreement from the new agency, an investor would first have to secure a preliminary license from the Energy and Mineral Resources Ministry.
"This license will allow them to carry out pre-prospecting work to determine the project's feasibility. After the project has been shown to be economically viable, then the firm can submit its proposal for a mining agreement."
Under the mining agreement, the firm will enjoy various benefits, including the charging of tax at a fixed rate and the right to go to international arbitration should a dispute arise with the government.
The bill, if approved, will supersede the existing 1967 Mining Law.