ESDM Explains Reasons Why Mining Must Utilise Local Contractors
The Ministry of Energy and Mineral Resources (ESDM) has emphasised that holders of Mining Business Licences (IUP) are prohibited from arbitrarily conducting all mining activities using their own subsidiaries or affiliates. The objective is to encourage the empowerment of local entrepreneurs and contractors and to prevent the practice of monopolising mining service works in the regions.
This is also stipulated in Ministerial Decree Number 365.K/MB.01/MEM.B/2026 regarding the Technical Guidelines for the Implementation of Approval for the Use of Subsidiaries and/or Affiliates in the Mineral and Coal Mining Service Business.
The Director General of Minerals and Coal at the Ministry of ESDM, Tri Winarno, stated that the prohibition on independent involvement of affiliates aims to create space for collaboration with contractors located around mining areas. Under this regulation, large mining companies are encouraged to partner with local entrepreneurs to deliver a positive economic impact on the local regions.
“It is not allowed; for instance, if it is an affiliate, it is not permitted. This means they cannot perform everything by themselves,” Tri stated when met at the Kalibara Heroes Cemetery (TMP) on Wednesday (30/09/2026).
Tri emphasised that this policy is highly positive in driving the development of regional mining service entrepreneurs. Nevertheless, the government continues to design flexibility schemes or exceptions within the Ministerial Decree to accommodate certain operations.
“In the regulation, affiliates are indeed not permitted. However, the Ministerial Decree allows for affiliates under certain criteria. These criteria include meeting domestic needs, National Strategic Projects (PSN), and downstreaming processes,” he added.
He explained that the reason for the inclusion of exception clauses in the Ministerial Decree is based on field realities, where not all regions possess local service providers that meet the technical criteria of the companies. Therefore, an exception space is provided to ensure that national mining operations do not halt due to the absence of suitable local partners.
“The background of this Ministerial Decree is that in certain regions, there are no providers that meet the criteria to be a partner for the company; therefore, it is made possible. We must ensure that operations do not become locked,” he concluded.
Full contents of ESDM Ministerial Decree Number 365.K/MB.01/MEM.B/2026:
FIRST:
Mining Business Licence or Special Mining Business Licence holders using mining services in their business activities must use companies holding Mining Service Business Licences, with provisions prioritising mining service companies within the regency/city areas surrounding the Mining Business Licence Area or Special Mining Business Licence Area.
SECOND:
Mining Business Licence or Special Mining Business Licence holders are prohibited from involving subsidiaries and/or affiliates in the mineral and coal mining service business without the Minister’s approval.
THIRD:
The prohibition of involving companies and/or affiliates in the mineral and coal mining service business as referred to in the SECOND Dictum includes:
direct share ownership by the Mining Business Licence or Special Mining Business Licence holder in the Mining Service Business Licence holder; or
the same one or more ultimate beneficial owners of the Mining Business Licence or Special and/or Special Mining Business Licence holder with the Mining Service Business Licence holder.
FOURTH:
Exceptions for the use of subsidiaries and/or affiliates in the mineral and coal mining service business through approval as referred to in the SECOND Dictum can only be granted to Mining Business Licence or Special Mining Business Licence holders currently undertaking government assignments, including:
implementation of national strategic projects;
construction of mineral processing and/or refining facilities and/or coal development and/or utilisation activities; and/or
fulfilment of minerals or coal for domestic needs.
FIFTH:
Applications for approval to use subsidiaries and/or affiliates as referred to in the FOURTH Dictum shall be submitted to the Minister.
SIXTH:
The granting of approval for the application to use subsidiaries and/or affiliates in the mineral and coal mining service business by the Minister shall be provided within 14 (fourteen) working days from the receipt of a complete and correct application.
SEVENTH:
Approval for the use of subsidiaries and/or affiliates in the mineral and coal mining service business:
is granted according to the field and sub-field of the Mining Service Business Licence of the subsidiary and/or affiliate as per the submitted application; and
remains valid until the expiry of the Mining Service Business Licence of the subsidiary and/or affiliate.
EIGHTH:
For Mining Business Licences issued by a Governor within their authority, applications for approval to use subsidiaries and/or affiliates may be submitted to the Governor.
NINTH:
In the event of administrative errors and/or evaluation errors in the process of issuing approval or rejection of approval for the use of subsidiaries and/or affiliates, corrections may be made by the Minister or Governor according to their authority.
TENTH:
The provisions of this Ministerial Decree shall apply mutatis mutandis to holders of Special Mining Business Licences as a Continuation of Contract/Agreement Operations, Contract of Work holders, and Coal Mining Business Agreement holders.
ELEVENTH:
Upon the effective date of this Ministerial Decree, the Regulation of the Director General of Minerals, Coal and Geothermal Number 376.K/30/DJB/2010 regarding the Procedures and Requirements for Application for Approval of Participation of Subsidiaries…