Kuntoro wants provinces to get mining royalties

Kuntoro wants provinces to get mining royalties

JAKARTA (JP): Minister of Mines and Energy Kuntoro
Mangkusubroto said yesterday that the government should in future
split royalties from mining, oil and gas operations with the
producing provinces.

He said the current law on royalties from mining, gas and oil
operations should be changed to allow the provincial
administrations to get a portion of the money to speed up the
development of their areas.

"It's high time for us to have a law which allows provinces to
get part of the royalties from the development of their natural
resources," Kuntoro said.

He noted such a law should also cover royalties from other
natural resources like forests and plantations. As such, the
drafting of the law should involve ministries dealing with
mining, oil and gas, forestry and plantations.

Kuntoro however said the government had thus far not yet made
any plans to start drafting such a law.

Protests have long been raised by people in several provinces
to demand part of the earnings from oil, gas and mining
operations in their regions.

The protests have intensified since the downfall of Soeharto,
who in the past paid little attention to the complaints.

Some government critics are now warning about possible
national disintegration if the central government does not heed
the provinces' demands.

The legislature of oil and gas-rich Riau in central Sumatra
recently demanded the central government introduce a law allowing
the province to get a portion of revenues generated from the
development of their oil and mineral resources.

Riau. through PT Caltex Pacific Indonesia, accounts for half
of the country's oil production of 1.5 million barrels per day.

Tribal people in Irian Jaya have also long demanded a large
portion of the government's earnings from the development of
their gold and copper resources by PT Freeport Indonesia, a
subsidiary of Freeport McMoRan Copper and Gold of the United
States.

Under current production sharing contracts (PSC) with oil and
gas contractors, the government receives between 65 percent and
90 percent of their output.

Under current contracts of work (COW) with mining contractors,
the government receives taxes and royalties.

The earnings from oil and gas operations, as well as tax and
royalties from mining companies are at present pooled into the
state budget and then distributed to the provinces with little
regard to their contribution to the state budget.

Furthermore, provincial administrations only receive half of
the land and building tax while other taxes go wholly to the
central government.

Kuntoro said there was a clause in mining contracts signed
since 1995 obliging contractors to send 80 percent of royalties
to local authorities and only 20 percent to the central
government.

Eighty percent of the royalties for the local administrations
should be sent to the districts where the mines are located, and
the other 20 percent to the provincial administration.

But, Kuntoro said, the COW clause could not be implemented
since it is in conflict with a governmental regulation which
stipulates that the royalties should be first delivered to the
central government before being redistributed to the provincial
administrations. (jsk)