The government may request increased royalty payments from mining companies by reviewing their current contracts following the enactment of an amended mining law, Energy and Mineral Resources Ministry Purnomo Yusgiantoro says.
Purnomo told reporters Monday the government planned to raise state income from the mining sector by examining the extent to which contracts contributed to the country's overall welfare.
"We must evaluate contract by contract. Several contracts have already resulted in optimum contributions (to the state income), while others have yet to do so."
"Therefore, we will optimize their contributions. We must talk to them so they will agree to increase their royalty payments," Purnomo said.
He refused to name any mining companies which had yet to give maximum contributions to the state.
The House of Representatives last week passed the amended law, which adopts a new permit system, replacing the Contract of Work (COW), as well as mandating adjustments to existing contracts.
While Purnomo has repeatedly said the government would uphold existing contracts, a review is still needed and seeking greater royalties from mining companies would not necessarily violate these contracts.
"Contracts can be changed as long as both parties have agreed," he said.
Under the new regulations, mining companies operating in so-called state reserve areas must allocate 10 percent of their net profits to the government, 4 percent of which will go to the central government and 6 percent to local administrations.
The new law caps areas to be made available for metal production to 25,000 hectares for each license and for coal to 15,000 hectares per license, far lower than the government regulations in 2001 that designated up to 100,000 hectares for each contract of work for coal and up to 250,000 hectares per license for other minerals.
These amended limitations on the permitted scope of mining areas will apply to new contracts.
However, Purnomo said the existing contract holders must also submit comprehensive workplans for their entire working areas.
"The companies must inform us whether they will be able to develop all of their area," Purnomo said, adding the companies might eventually have to relinquish part of their areas if unable to carry out required activities in them.
Purnomo said the government was still discussing how this rule would be implemented.
Bambang Gatot Ariyono, the ministry's director for coal and mineral development, said on Dec. 17 the law still needed to be clarified further with several new implementing regulations.
The government has targeted investment in mining to reach US$1.55 billion this year. The figure is expected to increase to $2.14 billion in 2009. -- JP/Alfian
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